How to effectively submit an offer 15-20% less than asking price

I've done this for my own purchases, so I know the feeling. Here's what I did:

1. Put your offer in writing ASAP. I sent an email to the listing broker and followed up with a phone call to announce the email. Hardly anybody wants to do writing for some reason, so right there you come across as one serious buyer. Remember, sellers are scared of buyers who can't actually afford the place.

2. In your letter, you can mention that you know of better apartments for less, but don't list them. (You may use your list later). The way to put it is to say something like, "This is a very fair, even generous, offer for this unit because...." BUT You don't want to dis the apartment!

3. Instead, you talk a little about yourself: where you work, the fact you have been pre-approved for financing (and if you don't have such a letter forgettaboutit making this offer), how huge your down payment is, and your salary/assets. The fear on the latter thing is that then you will be pushed to pay more than you had to, all you could possibly afford, but in my experience that won't happen if you stand in front of a mirror and practice saying "No, not for this apartment." You can also convey that to the seller's broker. The risk if you don't put it in is that you will be beaten out by a buyer represented by a buyer's broker, who will make damn sure they put this in if the broker knows anything.

4. Also put the name of your real estate lawyer, with full contact info. You don't have one yet? Get one first, then you can start making offers.

5. Put a deadline on a response to your offer. Word this with exquisite politeness, though. People like to do business with nice people. 4 days.

Hold off on putting out your max price until you have to. You need to know what that number is, so clarify that in your own mind. But if you can get this for less than your max, why not??

Sweetheart, there is nothing unethical or illegal or even unusual about the seller accepting a higher offer from someone else before your contract is signed. Here in New York, we don't have "binders" where a potential buyer puts up earnest money at the time of the offer. You can make a serious offer in New York for free, and not all states let you do that--not my home state. AND you can change your mind with no harm to you! In exchange, however, the seller can wait for a better buyer--and also risk the fact that you may walk, and there's no buyer. So it is really fair, not unethical, if you think about it. The seller has risks too.

Once the contract is drafted by the seller's attorney and signed, then we enter a different universe where there are consequences for failure to live up to the contract.

If you might like me to represent you as a buyer's broker, give me a call. All the best to you, I hope it works out great!

{Manhattan real estate agent 917. 365. 0876}

Thanks very much for the good advice, but how do we best manage against a higher offer emerging after we have agreement on the price with seller/seller's broker? Is it simply that we should assume we'll need to increase our offer by another 1% or so in between what we believed was the agreed to price and the contract being signed?

You MUST MUST remove all emotion from this bid. Beware of the phantom bidder the broker will bring up during negotions.

You must be firm on your top price and walk away cold if are forced in a bogus bidding war. You will never know if it was true

lab9 - you cannot know or prevent another buyer making a more attractive offer (more money, more cash, better assets, whatever) than yours. Whether the buyer "expects" you to come up another 1%, 2% or 20% based upon another buyer's offer is simply their hope and desire. They risk you walking away. They may be willing to take that risk, or not.

If it really bothers you keep back 1% or whatever, from the offer price you're going to make. That is all you can do.

Thanks very much

5. Put a deadline on a response to your offer. Word this with exquisite politeness, though. People like to do business with nice people. 4 days.

Foolish. I sell small businesses for a living. Sometimes I get a quick/early offer with a short deadline. I always respond politely that we won't be in a position to respond that quickly as we want to see what the market will yield, but I appreciate the patience of the person and will remain in touch. I neither hint that the price is high or low, and truth be told, I don't yet know what the market will yield. If the person is interested, they aren't going anywhere. Rational sellers know this. Jokers who would truly disappear within 4 days (or even a month), even if you proceed with them are going to be a problem in the period to getting a deal done. They've got the mindset that they are in charge and have the upper hand, and/or that this deal is an option for them that they can back out of.

I don't care how polite the language is.

One of my all-time favorite NYT Real-Estate articles:

"Negotiating for a House? Start With ‘Dear Seller’"

http://www.nytimes.com/2008/05/31/business/yourmoney/31money.html

No need in this market to be defensive about making an offer like that, but as an unrepresented buyer you need to show that you are (a) serious, (b) well-informed, (c) well qualified to pass *this* board (it sounds like you are bidding on a coop, not a condo). Putting aside the very interesting question of what the true market value of the apartment is, you should know your upper limit and absolutely be prepared to walk away, as bugelrex said.

Your offer *has* to be in writing and supported with your mortgage pre-qualification and enough financial information to establish your qualifications (which is a sliding scale depending on the building and your situation). (Certainly a REBNY form of financial statement; probably [redacted] bank or other account statements to show your assets; probably a [redacted] W-2 or other proof of income.)

Your letter should show you are "responsible" enough to live in the coop, probably addressing things like how long you have been employed at [wherever], an indication of your credit rating, something about how much debt you carry (do you pay off your credit cards every month??), and other things you think may be helpful in making the case that you *will* pass this board.

You can establish you are serious by saying something along the lines of "we've been looking at 2 bedrooms in this area for __ months and have seen more than __ apartments. We've been following the price drops on the unsold apartments and the closing prices on the few units that have sold, so we feel we have a very good sense of actual market values. We are happy to share information about the listings and sales that are most relevant to our bid, assuming you will do the same to justify your counter-offer." (Or something else that helps your credibility as an informed bidder.)

Definitely identify your attorney and state that you have already begun pulling the documentation needed for a coop application (financial asset and liability proofs) and are prepared to get landlord, employment, personal and business reference letters. If you will be ready to close at the earliest date the coop board can approve your application, say so. If you can flexible about closing if the sellers need that, say that.

These are general principles, to modify if there's a better way to show that you are (a) serious, (b) well-informed, (c) well qualified. The overall goal is to make the sellers worry about losing you. Good luck.

whatever you do, please do not use that stupid NY Times "Dear Seller" letter. It will get you nowhere. Also, whatever you offer, be prepared to negotiate. It is highly unlikely the seller will accept your offer right off the bat. They will counter.