It’s a great time to own real estate in New York City and be in a position to sell it. With the stock market at record highs and a strong job market, there are many new entrants into the property market as well as buyers looking to upsize. As a seller, where does that leave you? In a very strong position! If you are selling your NYC apartment and it is priced competitively, you will be in a position to field numerous offers. That’s right — the bidding wars are back.
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However, not all offers are created equal. As a seller, whether you own an apartment or brownstone, you need to strategically analyze the offers you receive and it’s not necessarily as easy as looking at the bid price offered by a potential buyer. There are numerous important factors to consider. As a seller, here are the best offers to consider:
Cash is king. Nothing could be better than an all-cash offer when it comes to selling NYC real estate.
Cash generally makes for a frictionless transaction that isn’t dependent on financing. Financing also takes approximately 45 days or so to obtain from the moment the contract is signed, therefore cash closings are usually able to proceed with much greater efficiency and speed. While cash deals are the most favorable for sellers, they also come at a price. A cash buyer will often expect a slight discount, as they’re fully aware that they are the strongest potential buyers that exist. The only thing that is stronger than an all-cash buyer is an all-cash buyer that is willing to pay more. They exist and given the strength of the market, this is a trend that is coming back.
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The main question that you’ll have to ask yourself is whether you would be willing to take a slight discount to go forward with an all-cash offer as compared to a buyer that is financing. It’s a calculated risk and should also be highly dependent on the financial strength of the bidders and their likelihood of receiving financing.
Financing With Waived Mortgage Contingency
If you receive an offer that requires financing, and the buyer is willing to waive the mortgage contingency, this is nearly as good as a cash offer. While this still requires time involved for the buyer to actually procure the mortgage, it means the buyer is confident enough that he or she will receive the financing, that they’re willing to either fund any deficit with cash or walk away from the deal and lose their 10 percent deposit.
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It’s important to note that many buyers may have the cash by themselves or from their families to purchase a property in all-cash should they need to, but they chose to finance because they prefer to leverage and receive some of the tax benefits associated with financing a purchase. From a seller’s perspective, this is a very strong offer, and it might not come with the same expectation of discount as an all-cash deal may have.
Financing With More Than 20% Down
If you receive an offer with 20 percent down and 80 percent financing, this is a fairly standard offer in NYC, unless of course you are selling a co-op that requires a higher down payment. Therefore, any offer that offers more than 20 percent is considered a good offer. We can’t all get all-cash offers! For instance, if a would-be buyer is willing to do 30 percent down, that should provide you with a higher degree of confidence that they’ll be able to receive financing. Of course, no offer should be fielded without actually seeing a preapproval, proof of funds, income and credit scores, as it is this combination of factors that will be the true indicator of how financeable a potential buyer is. However, all things being equal, go with the buyer who is willing to provide more money down.
Financing With 20% Down
Twenty percent down is par for the course when it comes to buying NYC real estate. As a seller, you’re hoping that at the very least you receive offers with at least 20 percent down and 80 percent financing. A buyer who is willing to put 20 percent down and is able to show a preapproval from a reputable lender is demonstrating that they have the funds and income combination to make this deal happen. If you were to receive an all cash offer and an offer of 20 percent down, your expectation should be that the person with the 20 percent down would need to pay more than the all-cash buyer for you to put up with the risk of the deal falling apart due to financing issues.
Financing With Less Than 20% Down
It’s possible that you may receive offers from buyers that are looking to put less than 20 percent down. The reason for this is because the buyer may not have the cash reserves but may have ample income to afford the monthly payments. As the saying goes, beggars can’t be choosers. If this is the only offer you receive, and you’re not looking to wait any longer to shop the property around, then run with this deal. I’ve personally worked with clients on the buy-side that have gone this route, and while I had to consistently comfort the seller and seller’s broker that my clients are good for it in terms of making the deal happen, it did take a great deal of convincing and persuasion. In the end, it all worked out for both parties. My buyers were ecstatic that they were proud homeowners and the seller was equally as excited to sell his apartment.
As mentioned previously, no offer is complete without the entire financial picture of the buying party. This includes income, credit, liquid assets and so forth. As the selling party, make sure to work closely with your broker to ensure that you strategically field any offers you receive and work to appropriately negotiate the terms that work best for you. At Blooming Sky, we work closely with both buyers and sellers to ensure our parties are appropriately represented in real estate transactions of any scale.