NYC property values have been rising steadily for more than two years. According to reports from the major brokerages, the number of closed transactions in Q1 2014 was at a seven year high, setting new records with average apartment prices exceeding $1.7M. Limited supply and high demand have become chronic market conditions which continue to drive up prices. Month after month, a strong local economy, historically still low mortgage rates and robust foreign investments contribute to successive price increases. As the climate for buyers becomes ever more challenging, I offer a basic primer for those purchasers who seek to win in the current hot seller’s market.
First and foremost, if you’ve lost in a bidding war, don’t lose confidence. Know your personal limits but reach beyond disappointment. Think of Fred Astaire and Ginger Rogers—http://www.youtube.com/watch?v=AGUsRGuZb6k:
Pick yourself up, dust yourself off
Start all over again.
Stick with the process, act with deliberation and determination, and you’ll succeed. Heed these three steps: 1) Collaborate With A Pro, 2) Be Flexible and Ready, and 3) Rush To Contract.
Collaborate With A Pro
Hire an advocate and collaborate together. Good properties sell fast, so you need to gain access quickly and have someone negotiate on your behalf and keep your deal on track. More likely than not, today’s seller has engaged the services of a real estate professional who provides undivided loyalty to his/her client to identify a buyer and bring about a meeting of the minds. While websites like StreetEasy offer listing information and sales histories, a trusted advisor will offer negotiating strategy and suggest resale potential, adding perspective and insight to choices for more informed decision making. Contrary to lay opinion, experienced brokers acknowledge that when buyer and seller each has separate agency representation, transactions are more likely to proceed to closing more smoothly with fewer risks of derailing. An experienced agent will not only bring the right comps to the appraiser but will serve as point person for all the players, including attorney, lender, contractor, and designer.
Be Flexible and Ready
Not every property can be seen on a weekend as many buildings have strict 9-5, weekday showing rules. Visiting properties at Sunday open houses only, may mean missing an opportunity, so best to have the babysitter on call.
If you plan to renovate, examine the board’s alteration agreement so there are no surprises after closing. Line up an attorney who specializes in NYC real estate.
There’s more to making an offer than submitting a bid. A clear net worth statement and employment profile will demonstrate to the seller that you have the funds to close as well as the assets and income to get board approval. If you plan to finance, pre approval from a recognized lender is evidence that the bank already has checked your credit history and reviewed your income, assets and liabilities. If there are blemishes on your accounts, resolve these before you apply for a loan. Credit service companies can clean up delinquencies and settle disputed claims which if left unresolved damage your credit score. In order to compete with cash bidders, consider whether you can waive the financing contingency. Once you’ve identified the property, your chosen lender can check to see whether the building is on the bank’s approved list, and if not what needs to happen to correct that. Very often appraisals can be ordered before contract signing to avoid low estimate surprises. For contingent contracts, shortening the time of the contingency clause to 10 days may make the risk more acceptable to a seller. Additionally a directed financing contingency to a named lender may also provide the seller with an additional level of comfort.
In competitive situations, the terms of the deal matter greatly, and the buyer's qualifications weigh heavily especially when co-op board approval is required. Convey flexibility to match the seller's time frame for closing and occupancy dates. A personal cover letter helps to humanize negotiations. When everything else is equal, often the scales can be tipped over a rival’s offer if the agent representing you is known as an experienced dealmaker who will facilitate a closing. In best and highest scenarios, the difference between a winning and losing offer may be insignificant or the amount can be staggering. Today’s competitive bidding starts with the asking as the floor and not the ceiling.
Rush To Contract
When your bid is accepted, instruct your attorney to expedite contract negotiations and complete due diligence promptly. Parties are not bound until a contract of sale is fully executed. With back-up bidders in the wings, delay could cost you money and the property.
Short inventory and high demand are likely to continue throughout this year and into 2015. With buyers far outnumbering sellers and the pace of trading quickening, purchasers are reminded to “… take a deep breath / Pick yourself up, dust yourself off / Start all over again.”