New York City is a hyper-competitive real estate market. With more demand than supply, well-priced properties are getting snapped up within days of getting dropped onto the market. Buying an apartment in NYC doesn’t just start and stop with finding an apartment you like. Once you’ve found the property that suits your needs, your offer still needs to be accepted. Therefore, patience will be your greatest friend. Let’s discuss some of the reasons your offer could get rejected.
So you’ve found the apartment you just can’t be without. You and your broker discuss the strategy to move forward. Your broker submits an offer. Several days later, the listing agent tells your broker that the property has received multiple bids. This is where you and your broker need to be tactical about how to proceed with an offer. On the one hand, you don’t want to lose out on the property, and on the other hand, you don’t want to grossly overpay because you have a fear of missing out.
You and your broker find a number that makes sense based on neighborhood comps, and maybe throw in a slight premium to give you the best chance of getting the property. However, that slight premium that you threw in might not be enough! After submitting the revised offer, your broker hears back that you were outbid. Don’t let losing out eat you up — it happens. Ultimately, someone bid significantly above comps to get this property. Do you want to buy an apartment at the top of the market, or do you prefer being strategic about the price point you get in on?
Cash is king. Leverage and credit is the American way, but cash still rules everything around us. Same thing holds true for apartment sales. You may have provided a higher offer, but because of the amount of time involved in financing a deal, a seller would generally be much more inclined to take an all-cash offer at a lower price. There is simply much more risk involved with financing. Will you get the mortgage? Will the property appraise? Low appraisals do happen, and there is something you can do if your appraisal comes back lower than the contract price.
Your offer is going to be contingent on financing, which means that if for any reason you can’t get financing, you can back out of the deal. For an all-cash buyer, there are no financing contingencies, because they don’t require appraisals or a review from underwriting.
Getting an offer accepted at first pass, particularly when you’re bidding under the asking price, does not happen very often. The caveat is that when you’re an all-cash buyer, you may have sellers bending over backwards for you, because losing out on you is a risk they may not want to take. An offer is often a conversation starter. It gets the dialogue started and begins the back and forth between parties over price and other contingencies.
However, if your offer comes in significantly under ask, it may function as more of an insult than an opener to dialogue. Don’t expect sellers to negotiate themselves down if your offer is so low that it may not be deemed serious. Your offer will get flat-out rejected with no counteroffer provided.
Your financial situation is complex. It’s made up of your income, assets, debts and credit. A blip on any of these may make you seem like a risky candidate. Submitting a preapproval with an offer is par for the course, but a preapproval is no guarantee of being able to get the mortgage, as everything still undergoes a thorough layer of underwriting. Along with the offer, your broker will submit a snapshot of your financial situation. Your financials may not be weak per se, but compared to other potential suitors, they may be considered weaker.
A seller would prefer buyers with higher steady incomes, higher assets, lower debts and good credit. This reduces the risk that the seller is sitting in contract for two months only for the contract to fall apart because the would-be buyer isn’t able to get a loan.
The co-op process is unique in that it requires a thorough personal screening of would-be buyers. This screening is done by vetting a detailed application, relying on personal references, and interviewing the candidate. Unlike condos, which are just concerned with your ability to close on the property, co-ops are able to make subjective judgments based on any component of the application process.
Some co-op boards are stricter than others. Additionally, co-ops often have stricter financial guidelines than lenders. That means if your financials already look a bit shaky based on the size of the mortgage you plan on taking out, the co-op board might invite another layer of scrutiny to the purchase process. You might get approved for a loan, but you could get rejected by the co-op board for the same financial profile you submitted to lender. Even if you’re considering purchasing a property with all cash, it doesn’t mean you’ll be able to pass the co-op board. There are famous celebrities that have been rejected by boards.
When the listing broker sees a financial profile that will not meet the board’s expectations, the offer may immediately be rejected.
Stay enthusiastic about the purchase process. There’s a property out there for you, and everything will eventually work itself out. Don’t let rejection dissuade you from purchasing. It’s part of the process, and will actually help you become much more decisive about making a decision when you find the next property you would like to make an offer on. Additionally, work with a broker who will represent your interests throughout the entire process and help you prepare offers that put you in the position to win — without overpaying.
Related: