I am frequently emailed specific questions from TG readers to whom I directly respond. Occasionally, the questions are such that I believe the responses would be helpful to all TG readers. The comment forum of the blog is also a great place to gain additional insight from others who are willing to share their experiences.
The following two questions were posed by a TrueGotham reader who is obviously somewhere in the stages of purchasing in a new development project:
Q) When buying late in the sales process where the vast majority of apartments are already sold, should you always expect/insist that the selling agent representing the developer will disclose prices paid by those before you (any recommended tactics around this)? If the other apartments have been sold but not yet closed on, assume this isn’t public data and there is no way to determine aside from talking to people?
I have found in my 16 years in the real estate business that expecting disclosure of recent sales data, particularly apartments that haven’t closed, usually results in disappointment. Keep in mind that over the past 7 or so years that new development projects have amended their offering plans so frequently with price increases that the data you are seeking is often irrelevant. It will just make you wish you purchased earlier. That said, I have also found that the most successful development projects won’t only disclose info but they will boast about what properties sold for almost as to make you feel depressed that you didn’t buy earlier. The best advice I have is to do your homework and research the prices in other comparable development projects to get a better sense of the properties value. And remember that when dealing with most developers, they are exceptional at pricing their product at levels that will be absorbed by the marketplace. They have done their homework.
Q) What is the recommended procedure/tactics around submitting a bid on a new construction apartment slightly below asking price if you’re not using a buy-side broker at this stage?
There is absolutely no harm in submitting a bid below the asking price. NOTE: 99.9% of developers protect brokers and have already priced the commission into their Pro forma before the project ever breaks ground. You won’t likely get a better deal without a broker. But if you do prefer to go after it on your own, don’t expect huge discounts off the asking prices. Again, developers are generally keyed in on what the market will bear for their properties. You may want to consider a bid at 5% below the asking price and/or suggesting that the developer absorb some of those high new development closing costs. Developers are much more likely to offer a concession in closing costs at this stage than a price reduction but give it a shot. An offer below ask will not be taken personally by a developer the way it may be by an individual apartment owner. It’s business.
Hope this is helpful and best of luck. If any TG readers out there have differing opinions/advice or thoughts to share on either of these questions, please chime in.