How Much to Bid?

what are the comps?

You can bid whatever price you feel comfortable paying and whatever you truly believe the apartment to be worth, especially in this market environment. Asking prices are completely arbitrary and represent the seller's "best case scenario." Besides, who cares if you hurt their feelings? Remember that this is a financial transaction, not a date. Also remember that the seller can counter-offer you after you've put in a bid. I read a column in the Daily News by Barbara Corcoran that a good starting point is 15% below asking and then work things out from there (this also probably means that sellers intentionally set their asking prices high in anticipation of lower bids coming in). With today's economy, you have much more negotiating power than you did 1-year ago. Believe me...right now, there are much more apartments on the market than there are buyers. I can see the nervousness on the brokers' faces. Good luck.

Ignore the offer price. Research comparable properties - ideally within the same building. Figure out where you want the negotiations to end and then make an offer that gives you room to move to your end point using whatever strategy you choose to employ.

Ask your realtor to show you the comps for the bldg. and the neighborhood.

"especially in this market environment"
"completely arbitrary"
"15% below asking"
"With today's economy"
"nervousness on the brokers' faces"

iMom, have you been watching the Manhattan real estate market? From the way you talk, I would guess you are from Miami. Your advise does not match the current market environment.

Juiceman, See the following link from the Daily News from 2/21/2008:

http://www.nydailynews.com/services/realestate/2008/02/21/2008-02-21_senior_looking_to_make_life_decision.html?page=1

"Q. My wife and I are looking to buy a home and, after seven months, we finally saw something we like in Montclair, N.J. We're wondering how much below the asking price we should bid. We have no contingencies and a large down payment.

A. After seven months shopping the market, you probably have a good idea what the property is worth. Make a bid 10%-15% below that number. Remember to put your bid in writing, and tell the owners how much you love their home. Also, play up the fact that you're an all-cash, no-contingency buyer, which is rare and powerful in today's market. Ask the owners for an immediate counteroffer, so they know you're willing to move on."

Furthermore, I would argue that we're clearly in a recession, lenders have tightened mortgage requirements, and investment banks are laying people off. Meanwhile, there are lots of new developments (many of whom did most of their sales in 2007 or earlier) that haven't sold anything so far in 2008. Add to that the fact that construction has continued on countless new projects, adding to the already heavy supply. Granted, Manhattan isn't nearly as bad as Miami of course, but I stand by my earlier comments about this weak environment.

While I agree with those who say we are entering a bearish period for Manhattan RE over the short term, I think lessons in the Montclair RE market are not instructive here, iMom. Different state, different practices, different buyers and sellers, different types of property, different economics. That said, I don't think iMom is from Miami because if she were she would have recommended an opening offer 30% below list price--not 15%.

"After seven months shopping the market, you probably have a good idea what the property is worth. "

iMom, that is a key statement in the answer to this question. Recommending a 15% below ask offer without knowing what the property is worth based on some article you read in the daily news about Montclair NJ is well, irresponsible. Also, I understand the newspapers and CNN are babbling on about being in a recession, bad economy, etc. but we have seen little impact to this point with Manhattan real estate.

For those interested, I’ve been in Tampa and Miami over the past week. My buddy is renting a $750k (original list) brand new apartment with high end finishes, pool, and water views for $1500 a month. He doesn’t even live there, he uses it for poker tournaments. The building has 150+ units and 7 are occupied. There are two more condo buildings being built just like this one within walking distance.

Miami is a nightmare. The skyline looks like Shanghai, cranes everywhere with numerous 1000+ unit high rise condos being built right next to each other. These places are empty, bankrupt, and a couple huge projects are not even finished yet. People are getting offers for 50% below ask and they are being accepted. Miami has years to go to get through this inventory.

Seeing this makes me even more bullish on Manhattan real estate.

$384,160.72

A few points:

1) There are many people who have been shopping/studying the Manhattan RE market for 7 months or more. I myself resisted the urge to buy in the beginning of 2007 (about 12 months ago) and I feel like I've dodged a major bullet. In fact, many new developments (in Manhattan) have not sold any units in the last 5 months or more. Some developers haven't even adjusted their asking prices for that period and are still asking the same price as they did in the middle of 2007. You would be crazy to pay those prices now in March 2008. Several posters have mentioned that when they go to open houses, the brokers will openly admit that asking prices are highly negotiable. Do you think any developers would have accepted anything below asking-price 12 months ago? No.
2) There is nothing inherently wrong with bidding 15% below asking price. Many sellers set their asking prices optimistically high with the expectation of coming down during negotiations anyway.
3) The OP (read the message, people) said that he/she was thinking of bidding 10% below asking but didn't want to insult the seller. My point is "why would you care about insulting the seller?" Would you rather overbid/overpay and make the seller feel great? (No) The buyer's main concern is to get the apartment at the best possible price, not to be concerned with whether the seller is happy or not.

By the way, as I type this, gold is over $1,000/ounce, oil is over $110/gallon, the dollar is at $1.55/Euro, and the Dow is down slightly at 12,060. Yes my friends, this is a weak economic environment. At best, we are in a volatile, uncertain market environment. In either case, it's not a conducive environment for taking on a large financial commitment like a $2MM luxury condo. Haven't you heard of people who bought pre-construction who are now trying to flip their apartments even as the sponsor is still selling new units?

Oh, by the way Juiceman or anybody who thinks that I'm being irresponsible for my advice or that the Manhattan RE is immune. See the following link:

http://curbed.com/archives/2008/03/13/how_long_until_11_spring_is_put_to_sleep.php#reader_comments

"For a while, 11 Spring Street was Nolita's knight in shining graffiti, but now nobody wants the thing. The three condominiums in the converted stable/street art canvas have been on the market for about nine months, and the Sun's Bradley Hope reports that zero have been sold."

couldn't agree with you more, iMom. RoyKirk1, do your homework, get comps, and if the comps are old, bid lower to reflect the downward trend in the market. worst that can happen is that the seller counters or rejects outright. no harm, no foul. don't worry about "offending" the seller. this is business, not personal!

the ny market will absolutely, positively adjust to the downside- especially when wall street goes through the next round of brutal layoffs (imminent). the adjustment downwards may not be as drastic as parts of CA or FL, but it will happen. it'll just take longer since the "it's nyc" factor is significant, but patient buyers will be rewarded.

1) I don't disagree with the point you are making, new development can be down right scary right now. Most are working from cost and credit models that were valid pre-credit mess and are trying to figure out a way to make money. I find it funny when people curse at the new developments for not lowering prices. Why don’t folks just move on and find an existing condo or co-op? I guess the lure of brand new is quite alluring, but the premium right now seems stiff. Developers will either get people to buy or they will eventually have to discount or rent the units. These guys are in this to make money and they really don’t care if you think prices are high or not.

2) There is nothing wrong with bidding 15% below asking price. My point is, the OP did not qualify his question with any information about the building or neighborhood comps. Maybe he should bid 20% below? Maybe it is so well priced that an 8% offer is appropriate? We just don't know and is why a couple of us asked for more information. I’m sorry but a data point of 15% off of ask based a Montclair, NJ newspaper article just isn't valuable to the OP

3) I don't care what the seller thinks, but if you want to improve your chances of a low offer getting accepted, you have to do your homework. Bidding 15% below ask without any reason for it may work, but it most likely will not. If you base a lower offer on some solid research and facts, it has a better chance of being accepted.

I’m not trying to beat you up here iMom, I’m just stating that it can be dangerous to give advice to new buyers without knowing all the facts.

iMom, I'm sorry, but I have to chime in here.

Your postings, while I believe well meant, are rather puerile. The 11 Spring Street building was one that anyone in the know, armed with the back story, could have told you a year ago when the building was sold to the developers was an epic white elephant, good times, bad times, or otherwise. The building would have functioned best (and only modestly well, at that), as it's initial intended purchser Lochlan Murdoch envisioned, as a one person residence. There was no way possible to elegantly subdivide this building, particularly give n the initial purchase price point. Using this particular building as as some kind of poster child 'market indicator,' is indeed ignorant. And BTW, we can all read curbed.com by ourselves, thank you very much.

as for your comment "There is nothing inherently wrong with bidding 15% below asking price," well of course there's not. Nor is there anything inherently wrong with asking 15% ABOVE an appropriate asking price. The point is both strategies are idiotic. If a specific listing is innapropriately over priced to begin with in your estimation, you probably shouldn't even get involved in negotiations until th seller becomes a bit more realistic. If, however, the asking price makes basic sense to begin with, offering 15% off is a sure way to make the seller feel that you aren't remotely serious and to not give you the time of day, so again, what's the point in getting involved until YOU become more realistic. Using recent comps is the most realistic and succesful bidding and/or pricing tool that a potential seeler OR buyer can use - not picking arbitrary number out of this air, neither for asking the price nor for the offer.

Juiceman - It seems we're not too far off from our points-of-view. Our main difference is that I think any buyer would be out of their mind (although many people are) to come out and bid the seller's full-asking price (prior to any price-chopping). That would defeat the whole point of negotiating. Most sellers price their apartments high with the understanding that they will most likely have to negotiate downward. Using recent comps is important too, but in the case of new developments (some of which haven't sold in over 9 months or more), there are no RECENT comps because most sales were done during a much stronger market when everything was going for full-ask. To use those sales as a basis for the current market inaccurately values those apartments to the upside, which is of course, what the developers want.

Malraux - You are correct that 11 Spring is not a good barometer of the overall market, but it is by no means the only project that is having problems selling. The Manhattan RE market today suffers from the combination of 1) heavy existing inventory with additional units coming on-line over the next couple years 2) fewer potential buyers from 2A) IB layoffs/uncertainty over job security in related industries, 2B) tougher mortgage qualification standards, 3) the current economic recession (who knows how long it will last) - meanwhile, the asking prices for most new developments have not been adjusted downward to reflect these changes. Why would someone today pay the same price as someone 9-12 months ago? That is why sales (if any) have slowed to a trickle. Put it this way - an apartment (or anything for sale) is only worth what someone is willing to pay for it. If an apartment sits on the market for 9 months at $2MM with no buyers, then clearly it's not worth $2MM or else someone would have picked it up already. During the RE boom (when pricing for many current new developments were set), people were willing to pay above asking for many apartments. However, the intrinsic value of those apartments have since fallen, without the listing prices being adjusted accordingly to reflect that. That's exactly what is going on in the market. Just look at Streeteasy at some of these developments and you will see apartments sitting on the market for over 300 days!!!! Units would obviously not sit for so long if they were priced accordingly. A couple of things to think about:

1) Sooner or later, you WILL see developers capitulating to some extent on prices to stay competitive. There are simply too many units coming online and too many existing units to clear out for that not to happen. Developers can't wait forever while their unsold units sit on the market. I'm not saying there will be a firesale tomorrow, nor am I predicting a collapse, but you WILL eventually see units repriced downward.

2) Further out on the horizon, people who bought new developments over the last couple of years will start to feel the effect of their tax abatements wearing off. When you calculate the monthly carry cost of these units with full-taxes in effect, I'm not sure how many people might want to unload. Again, I'm not one of those kooks who yells "The sky is falling," but these are REAL economic factors that must be considered prior to any buyer submitting a bid in today's market.