% off the asking price on an apartment - 10% ,20% ???

Coop or condo? New dev.?

1-3%

Condo. New and old dev.

Where does the asking price sit relative to recent comps? If it's not new dev and there are comps for similar units in the buidling, consider condition, floor, view, etc. and bid an appropriate % below the comp price, regardless of asking. Though they usually just get flustered, have the specific comps in mind when discussing your bid w/ the seller's broker.

On a related note, there was a chart by Jonathon Miller in Curbed yesterday showing the spread between the top 10% of the NYC market and everything below it, with the "non-luxury" 90% of the market dropping in median price.

http://curbed.com/archives/2008/01/24/three_cents_worth_luxury_market_disconnect.php

Generically, I would figure out what price would make me happy. I would ask for twice that discount hoping at the end of the day, the price would accepted in the middle.

Other factors to consider: How long on the market? You can't lowball something fresh on the market and expect it to be well received... How is it priced comparable to peers? I think a 20% discount is really agressive unless it's mispriced or "unique." Most sellers would rather reduce the asking price in 5% increments until someone bites. Check out what the seller paid, if possible, as it's likely to be an anchor price, justified or not.

I tend to agree with Buster. If they're not insulted you didn't offer low enough. If it is a new dev. you can establish a rapport with the lead sled dog doing the sales...leave your name and say if the units sit you're interested in one at X price. Call back weekly to check in.

Of course, this only works if you have the time, patience, and persistence. This works particularly well with developers who trying to move their first or second project.

This is a great question. We are very eager to buy, but we seem to be seeing a lot of properties that are consistently priced about 30% or even 40% above building and area comps. I think this is happening because sellers assume that buyers will compare only against listing comps, not sales comps (which might be true, as we never knew the difference sales and listing comps until recently). Thus, once one property overprices then all the other properties also overprice. This makes it very difficult to put in a bid without insulting the seller. It seems that the only way to get around this is to wait for sellers to realize that their price is way too high and drop the listing price over time (so that it is "only" 20% over comps), which is not ideal for us as we would like to bid and close soon. The alternative is to check listings daily as I've noticed that the well-priced properties sell within a couple of weeks. Has anybody else noticed this overpricing phenomenon, and if so, is there any advice on how to gracefully point it out to the sellers? Hopefully, more properties will be added to the inventory soon....

Juiceman, you clown you. "1-3%" without even asking any questions! Come on, you don't want to be perceived as the next spunky, do you?

Where can you find the difference between sales and listing comps.

Maybe a silly question but is comps the abbrevation for comparables?

faustus, you are right. Allow me to qualify. On a place that you feel is fairly priced via comps / market research, etc in this market, 1-3% below ask is what I would expect as an offer. I agree with the posts above to make sure the price is in line to begin with.

Yes, comps is the abbrevation for comparable properties. And it's not a silly question - the last NYC property we bought we paid 10% over LISTING comp in an ALL-CASH DEAL, as we didn't even know enough to compare comps (and it wasn't a first-time purchase for either of us!) Anyway, the way I come up with sales comps now is to look up the average price per square foot (ppsf) for recent sales in the building, and multiply that by the square footage of the property. This is extremely easy to do with Streeteasy, as it lists average ppsf for recent sales for every building. And if you click on any property, you'll see that this is often significantly lower than the average ppsf for LISTINGS in the building (also shown). That's because sellers intentionally overprice, expecting to be bid down. The surprising thing for us once we started looking at this was that we couldn't believe how MUCH the average listing price was over the average sales price!!!!! We've also noticed that with the exception of idiots like us who never realized this until recently, most properties don't actually sell until they are much closer to the average sales price (apparently, the Manhattan market is very good at correcting itself, as other buyers are pretty good at ferretting out this info). Thus, the initial listing price may have no bearing whatsoever on how much the property eventually sells for, but it is a major bummer to have to wait it out until the seller realizes this. If you dig around on Streeteasy, you can look at past listing prices and sales prices (you have to sign up for the $10/month feature, which we eventually did and I think it's an extremely illuminating feature that I would recommend - and no, I'm not connected with Streeteasy or even in the real estate business!) and you can also see the history of initial listing prices and how long the property has been on the market and if it has increased or decreased in price. Anyway, I don't know if this helps at all, but it's a start.

Btw, the above is just for comps in the same building. For area comps, you just do the same thing with comparable properties in the area.

thanks a lot Amity95 that is great info

Other input will be greatly appreciated.

i bid 2% below ask 2 years ago for an apartment in a luxury building; but one that was from 1980 and needed some work. that said, they were insulted but countered. Again, that's 2006.

In this market - I think brokers and sellers are pricing in the probability of a below ask offer already so if you have the time and patience, I'd bid at least 5% below ask and see.

Does anybody have any advice on how to speed up the process of successfully bidding on a property for which the asking price is >20% over recent sales comps? Right now, it seems that we need to wait it out until the sellers get it into the right range on their own (or hope that something else pops up which is just as great that is appropriately priced), which is incredibly frustrating and annoying....

Submit an explanation with your low ball bid that includes comps supporting notion that your bid is market rate and not really low ball.

I just went through a protacted offer-counter-counter etc. with a potential buyer of my coop. We finally came to an agreement at 3.75% below my asking price. I had it priced correctly, it's a mint-apartment that shows well, and I felt a bit pained that no one offered full price. But I'm only a bit pained.

Amity95, I've seen the same pricing scenerio you describe, and in literally EVERY case (within my search parameters, of course), they've either pulled the listing, rented instead of selling (or continued a rental that was in place), or it's still sitting there. In one case I emailed the listing broker a list of comps and said I was open to a purchase within this range. He responded a month later, was slimy as hell, and was literally stuttering as I shot down his nonsense with comps and info on the building. It was fun, but they wound up continuing the rental. The amazing thing is, in many of these cases, the sellers are recent buyers, and you can see them trying to get some astronomical appreciation on their recent purchases. I guess they expected this would be the investment that made them a ton of quick, easy money, and they can't face the fact that after two years they can't break even factoring in broker fees, closing, lawyers, transfer taxes, etc.

One thought I had was to contact the sellers broker from a previous sale to represent me as a buyer, since he'd be "living proof" of the comps, but I've never followed through with it.

Some sellers, in a transitional market, will intentionally start out with the price elevated because they think that buyers want to negotiate. If the apartment has been on the market for awhile, or has some obvious difficulty (existing condos have real estate taxes that seems to be making it difficult for some of them to compete against new construction, for example, or the apartment is empty, or it's a co-op needing renovations, or there is a tenant in place, all of these could be price negotiation points).

Some people do NEED to sell, but they're usually not going to put that on the offering sheet. Do try to find comps, but when you do don't hesitate to make what you feel is a reasonable offer. The more you want it, the closer to asking it should be. If it's a property you wouldn't mind having, but you think it's too much, make your offer and let the seller decide yes or counter. If the seller says no but the property stays on the market for awhile, don't hesitate to try again (unless you received feedback that would indicate that it would not be welcome).

Good luck.

Amity95, I like the comp suggestion but would warn against using streeteasy for comp data - it's a nice point of reference, but kind of flawed since apt square footage used is usually (over)estimated by the listing broker. You might be taking mkt ppsf data (which can also be unreliable for many reasons) and applying it to an overly-inflated estimate of square footage. If you are buying a co-op, look into the number of shares you are receiving for x price per share and compare this to another apt recently sold in the building. If it's a condo, see if you can get the square footage listed in the offering memo. Or find an apartment in the same line sold in the building and make minor adjustments for floor. Of course, all of this info can be impossible to attain for various reasons, and at the end of the day, valuation is more of an art than a science - it's worth looking at different price points in the neighborhood to see what you get for the money and coming up with a reasonable value range for the apt. If you end up at the lower end of that range, you did well.

tenemental raises an excellent observation that ambitiously high pricing seems to come often from recent buyers looking for short-term profits. Their thinking is: "In order to make a reasonable profit I must sell at $x." It is flawed thinking. The value of an apartment is not what a seller thinks is fair profit; the value is what the market is willing to pay. In a sluggish or backsliding market, the seller's purchase price might matter to the seller, but it really should have virtually no bearing on a buyer's offer (other than to predict a bit how the seller might respond).

As for how much under asking to bid? It depends on how the property is priced to begin with. Some are priced to generate a bidding war. Last week I actually saw a bidding war break out in front of me at an open house for a very reasonable priced beautiful apt in a grade-A building/prime location. No discount or very little from the offer price would get you far there. Other apartments in the same building languish because sellers are asking prices as if the RE run-up never flattened or ended. Bidding 20% under on those with a nice letter of your reasoninig and a statement that you welcome further negotiations if perfectly acceptable. I don't buy into the "Don't insult the seller with that offer" school. This is a business transaction--it isn't personal. If you don't ask, you'll never know. Reasearch comps and base bids on that...however much under the offering price that are.

Thanks so much for the extremely helpful feedback and suggestions. Much to my dismay, I also discovered that one apt we liked very much was priced more than double what the sellers paid for it just 3 years prior to listing - and all the other apts in the building have remained flat over that period in terms of ppsf! I suppose we shouldn't have been so naive, but I was truly shocked that the apt could have been so intentionally and wildly overpriced (and the brokers insisted that the sellers were "not greedy" - but perhaps they had no idea either?) The sellers were willing to come down 20% pretty quickly - which we thought was generous at the time - but based on input from other people on Streeteasy we came to realize that even that was too high given building and area comps - in fact, that's how we learned how to look up comps.

Furthermore, the comment about ppsf being inflated is also very true. The only two properties in Manhattan that we have had appraised came in up to 15% fewer square feet than what was advertised, which is quite significant if you are calculating price based on square footage. Given that you have to put in a bid before getting an appraisal, it makes it very difficult to know if the bid you put in is even reasonable if the seller's numbers are off by that much.

Frankly speaking, we would strongly prefer not having to negotiate at all and we would be more than happy to bid at asking or even above if the asking price was at all comparable to other recent sales. But since discovering so recently that so many current listing prices are so wildly inflated we are quite discouraged. The suggestions of making a polite offer backed up with documentation (would ACRIS documents of other comparable recent sales including the seller's sales be the best way to go?) are really good ones - and even seem obvious now. It seems that if a property is very overpriced, however, that there may be no way out of simply waiting until the seller comes down to being within 20% of comps, as no one seems to think that it would be fruitful to place a bid less than 20% below asking?

One last suggestion: buy a book about negotiating for a car or general basic negotiating strategies. It's all pretty much the same. Keep it simple--short pamphlet-like paperbacks. These are often in racks near the check out counter at Kinko's or just look at the local book store. There are very basic things you should know that seem perfectly obvious when you read them, but are elusive until you do. It will make the process clearer to you, more comfortable, and more effective.

Amity95, I find your comments very interesting since my wife and I have had the same "bad surprise" of seeing asking prices going up (we saw a property asking price 20% higher than a sale made last month in the same area, with identical lot size and similar living sqft). We are also looking at comps directly from NYC.gov website : http://www.nyc.gov/html/dof/html/property/property_val_sales.shtml . There is no comment on the house, but we found out that some "free" website like trulia don't always give the "true" sale price...
I was wondering if any of you found any source that shows how NYC real estate market is really doing ?

Thanks and good luck

Streeteasy listings aren't the best resource for sales prices, but if you have some time and the patience start looking at properties that are similar to what you are looking for and keep track of them, how long they are on the market, if there are any price adjustments, etc. Remember, just because something goes into contract quickly doesn't always mean it sold at full price.

I have discussed this earlier, but I will repeat that I think that between the 3-4s preschool, kindergarten and middle school spots (as well as the increasing possibility that some of the top public schools may have to redirect or let people know that recatchement will occur within a year or two) may add to the general miasma that is this market (if you're in the co-op market, esp. 2-3 bedrooms, keep a sharp eye open for March-June listings). I wouldn't be in any hurry. There's absolutely no indication that interest rates will rise anytime soon, so wait until you find something you really like and can afford and that seems reasonable. If you've done your homework, when you walk into that properly priced apartment you can say "full-priced offer and I want... " without a problem. Or you can walk into the overpriced apartment and say "20% lower" and walk if it's not accepted.

Don't take it personally that apartments seem overinflated in price. Often it's the sellers trying to squeeze every drop out of the market, sometimes it's the broker trying to get the most possible (the industry generally isn't too happy about price reductions, but maybe if inventory increases they'll lighten up a bit.)

Good luck.

Again, thanks so much to everybody for their input. We are definitely going to read up on negotiating (again, seems so obvious - why didn't we do this before???) nico33, the tip on NYC.gov is very helpful too. How do you look at comps for coops, however? Will NYC.gov only work for condos? When I tried it, I could only get the actual building. And aboutready, we are indeed in the market for 2-3 bedroom coops, so while it is really hard to be patient as we just want to get this over with, I suppose we can wait it out a little longer until we see something that is really great AND priced right.

Good luck. You're absolutely right. Coops are harder to price but with a little work I think you can do OK, and possibly better than OK. Find a great broker. I have one that makes every search a bit easier.

I want to get it over with also, we've always owned from 1985-2004 and I'm so sad that we haven't made it back in. But, never give in to desperation. Time has not been on your side, but now it is!!

aboutready, what makes your broker so great? We used one for our last place, and while we liked her very much personally and she really worked hard, she's the one who led us to the all-cash deal at 10% above listing comps. In fact, our apt was featured in the NY Times and NY Post as a test case of whether or not an apt could sell for that much given a little renovation and staging. At this point, I would feel badly if someone worked hard and did not add any value and we ended up wanting to drop her/him (i.e., came up with listings that we could come up with on our own - and I would definitely want to double-check to make that sure nothing was missed). And I don't see how a buyer's broker can not escape the inherent conflict of interest in that a higher purchase price leads to a higher commission for the broker? I know this discussion is on another thread, and I don't think I'm the only one who is curious as to how a buyer's broker can add any value at all.

Amity95, the files you can download from the nyc.gov link will give you every sale back through 2004, coop and condo alike. There's a column that specifies which. I've compared numbers on the nyc.gov file and StreetEasy Recorded Sales and haven't found any inconsistencies.

That said, I probably should have ended that last sentence in a question mark. I really am curious as to how a buyer's broker can add any value at all??!

Amity, good question. I think the answer is two-fold: 1. Your broker can help you negotiate, beacuse it can be an advantage to have a third party negotiating for you. Your poker face is never better than when the other party can't see it. 2. Broker can act almost as a counselor as you bounce your thoughts off of them, not that you will get great feedback, but just hearing yourself speak out loud sometimes can help. As an aside, if the seller is paying 6% regardless (either all to his own broker or split in a co-broke), you might as well make sure half of it goes to someone who can help you with a lot of annoying little details like board packages, etc.

Though the seller's broker should be totally prepared to help with board packages, etc., if he/she's keeping both sides of the money. The seller's broker has, of course, a huge interest in everything going through for the buyer.

Pops, I think your answer is a good one, but I think tenemental is correct. Also, please forgive my asking this tenemental, but would you be able to tell me what link I click on from the nyc.gov site to check coop sales? I'm really sorry, but I just don't see the column???

Sorry, I meant correct about the seller's broker often being helpful and having an interest in the deal going through. I just don't want to waste the time of a buyer's broker if s/he can't add anything the seller's broker can't do, and I can't be confident that the inherent conflict of interest won't play in with the buyer's broker being motivated to push us toward a higher price. In fact, with someone like urbandigs, who seems quite knowledgeable and honorable, I can see how the consultation model might work quite nicely in terms of hiring him as a sounding board (and plus we wouldn't have to feel bad as we could pay him for his time). I don't know - I'm open to the idea of a buyer's broker but still not really convinced....

Don't discount the negotiating factor. If you trust your broker, he/she will represent your offers without the possibility of any emotion on your part coming through, and make it very difficult for the seller/seller's agent to read you, something especially important in more of a buyers' market. I also don't think that brokers in generally are going for the highest price, I find they are mostly transaction oriented. With the simple goal of making sure the deal happens, and if that means getting you your price, thats what they should be trying to do. If a broker is arguing with you about your offers, you should probably fire them, and find someone you can work with.

Amity95, when you go to http://www.nyc.gov/html/dof/html/property/property_val_sales.shtml, download one of the docs under "200x New York City Recorded Sales Data," whichever borough is appropriate. It's a fixed doc, not a searchable database, so you can't specify a co-ops only search. You can search for the address of a specific building to see what recent sales have gone for, and it's all organized by neighborhood, so you can see nearby sales as well. The third column from the left, BUILDING CLASS CATEGORY, will tell you if it's co-op or condo.

As for buyer's brokers, if I felt one was honest and open (such as Noah), I would trust them to bid aggressively on my behalf, and possibly carry a bit more weight and be more convincing than I would on my own. For some, the better business model is to make the clients happy, even if it means making less on each deal, and having a large, active client base (classic volume sales). Unfortunately, most of the brokers I have met seem desperate to ring every cent they possibly can out of the deal, even if they're supposedly on the buyer's side.

Pops is absolutely correct. Negotiation is the key. I find that people want the moon and the stars from their brokers when looking. A broker can (unless you're in the truly top tier, and even then I'm fairly certain I don't want a Dolly Lenz working my beat) only see so many units themselves. Buyers are tremendously wishy-washy on what really matters to them. I like to pick out my own units to see, and drag my broker around silly. I do open houses on my own, however, as a concession to his schedule. If I like something, we go back to see it. Sometimes I just tell him he should go see a property because it isn't right for me but I think it's a good deal and he might want to show it to others.

Why is my broker great? He has a fabulous sense of humor, he's great in a coffee shop between appointments, he works like a fiend for me and never complains if I decide the time isn't quite right to buy now (we have a very long-term relationship, he knows that as long as he's still working, I'll buy and list with him), and he at least pretends that being dragged around silly looking at units is educational for him. He's honest, and HE'S GREAT AT NEGOTIATING! I've done some great things, with amazing terms (financing contingencies, rent backs, etc.) at times when the market was saying such things weren't possible. I couldn't have asked for them myself, but he did it for me. And, he is not even a buyer's broker. He works for one of the big companies, but he has always got my offers through to the owners. Often with very good results. He does all the paperwork for the condo and coop boards (and you're going to be busy enough with the mortgage broker or bank), and all of his recommendations for mortgage brokers, attorneys, etc., have been great (although I understand the general caution in such matters, I started years ago, long before these advice boards, and I got lucky).

AMITY95: FWIW-- the dollar amount of commission reduced by any realistic negotiation is pretty negligible..every buyer needs to make their own choice about whether a buyer broker is right for them. (And if so, hopefully find one who seems on top of their game, trustworthy, and skilled), but either way the "conflict" inherent in the commission structure is pretty much a non-issue.

nyg, if the price is negotiated 10% lower, the commission is cut by 10%. How is that a non-issue? If a $1M property is cut to $900k and the commission is 6% split, the brokers each lose $3k. A 5% cut is still $1500, which is something I'm sure plenty of brokers wouldn't want to lose.

No, they would rather get the deal done and get the other $27,000 than not get it done at all.

Yes, but if they can play on the buyer's nervousness or inexperience (which I think has happened a lot during the runup - buy now, prices are only going up!), not negotiating aggressively DOES get the deal done as the seller is very happy and eager to close.

Thanks again for all the feedback. Found the nyc.gov site - thanks!!!! Ordered negotiation books online. And will definitely think about the broker issue - I just don't want to waste the person's time - but perhaps it would be a good idea as we do need to buy a place and god knows that we are pretty crappy negotiators....

I've also noticed that many apartments appear priced 20-30% higher than comps. It seems like the only thing to do is make an offer and see what happens. The suggestion above about putting an offer in writing seems a good one - it's best not to tip your hand in conversations with the broker. In addition to providing an explanation for the offer (i.e., comps), I'd also tell them it expires in a week or two. Force the seller to contemplate the possibility of missing the opportunity to get the place off their hands.

tenemental, I think that was the case (brokers urging you to pay up) last year, but they (should)recognize that we are now in a buyers' market and there is room to negotiate, where in the past there hasn't been, so they may of been offering good advice, based on the market conditions. I am not defending brokers just for the sake of it, it just seems like they were right, and I know a few who are telling me that you can absolutely negotiate now.

As tenemental says, even the ones who are not looking out for your best interest are looking to make the commission--a few grand each way really does not factor in. ideally a good broker should come referred by someone else who has worked with them. That way you immediately become a more valued client as you benefit from the relationship your friend has already established with the broker. It is always better for your purposes to have a broker who is looking at you as part of an existing relationship and not an insecure one time thing. You want a broker to feel sanguine that they will make their money (if you do indeed buy), and that way no individual deal with a specific apartment for you is more important than finding you the right place with the best terms. The worst way to deal with a broker is to run around with more than one or look without them as well because that creates an inherent disincentive for them to look at the big picture with you and they are more apt to be pushing you into a deal because their commission thru you is by no means secure.So again, it is an individual choice whether to go it alone or with a broker, but if you do choose the broker route take great care to select one you think is great, preferably one that comes referred, and let them know that you are loyal to them and expect loyalty and a great job in return.

sorry i meant "as Econ101 says"

Lots of solid advice on this thread. Only thing I have to add is that a buyer should be very careful when selecting a buyer's broker, even one that is referred. Many times (possibly most of the time), someone who refers a buyer's broker will have no genuine idea whether the broker they are referring did a good job for them or not. They may have positive feelings about their old broker, which may count for something, but they may not know that the broker was lazy and almost cost them their purchase (for example). In other words, do some investigating and if you have a friend who is referring someone - great! - but make sure that your inquiry doesn't end there.

Good thread.