I’m getting ready to make an offer on an apartment. I’ve already seen the place, got a mortgage prequal, found a RE lawyer. All that’s left to do is make the offer. I’m conflicted about what price to go in with though; here’s why. It’s listed above-market, based on price per square foot. After pulling up comps for the neighborhood and type of unit, I’m pretty sure of this. I also think the listed... [more]
I’m getting ready to make an offer on an apartment. I’ve already seen the place, got a mortgage prequal, found a RE lawyer. All that’s left to do is make the offer. I’m conflicted about what price to go in with though; here’s why.
It’s listed above-market, based on price per square foot. After pulling up comps for the neighborhood and type of unit, I’m pretty sure of this. I also think the listed square footage might be have been estimated a little generously, which of course would make it even more expensive on a ppsf basis. On the other hand, I really do like the place. It appears to be in perfect move-in condition, not to mention recently renovated. Maybe it does warrant a bit of a premium to the neighborhood, just not too much.
Here are the two approaches I’m considering:
1) Make an offer below the ask, along the lines of average ppsf. The unit is actually more $$$ than the average apartment of its type (I did some pretty detailed comp work, ha) so I’m doing it a favor by using ppsf. I didn’t have to stretch to arrive at this price, it feels fair. What I worry about is that the seller bought at the height of the bubble, and this offer would be below what he/she paid. Tough luck, I know, but I worry that they could have a psychological resistance to it. Anchoring, loss aversion… not to mention I think they sunk in some extra cash on the renovations. Anyway, I’d be making an offer that’s below the ask, but not insulting (hopefully). I’d include with it the reasons why I’m a desirable buyer (good finances, no buyer’s broker, etc.), flexible on move-in and other contingencies.
2) Make a strong offer, close to what the seller paid. My hope would be that it helps them overcome the loss aversion and racks up goodwill. Then, when the contracts start flying back and forth, ask to have closing costs taken care of (such as CEMA, transfer tax, all the other smart things I’ve read about here), be firm on move-in dates, etc. From what I’ve read, this stuff adds up fast, in the 10s of Ks. Maybe I still wind up paying more with this approach, but at least it sets a good tone (instead of a haggling one), and primes the seller and the seller’s broker to want to play nice, esp since I have no buyer’s broker. Who wants to nickel-and-dime on every little fee when they’ve gotten a great offer that they want to accept?
What do you all think? Option #1 seems like what most people would do, but property hasn’t been on the market that long (couple of months), so I’m afraid I’ll get the smackdown and they’ll just keep waiting it out. I kind of what to do #2, but what if they never concede on anything, and I wind up paying out of my ears for it all? I like the place, but I don’t want to be a dummy and overpay.
Also, in either case, what kind costs/fees should I specifically keep an eye on during closing? Either option works even better if I avoid getting buried in extra costs, of course.
[less]
Response by Howard35
over 13 years ago
Posts: 122
Member since: Dec 2010
My vote is for Option #1.
Ignored comment.
Unhide
Response by romary
over 13 years ago
Posts: 443
Member since: Aug 2008
Whatever, if you want it make what you consider to be a fair offer, your parlysis by over analysis is exhausting. Closing costs taken care of by seller? Not bloody likely. For a "$$$" unit you are nickel and diming to a fair thee well.
Ignored comment.
Unhide
Response by SBK2011
over 13 years ago
Posts: 74
Member since: Dec 2010
I think the best way to comp this unit is to look at the previous sale of the same unit, adjust for time and for renovations. Why are you looking at other apartments? Every building has its own market.
Ignored comment.
Unhide
Response by JButton
over 13 years ago
Posts: 447
Member since: Sep 2011
a couple of months on the market is a long time and it indicates that the place is overpriced. Priced right it would move quickly. Option 1 for sure. Option 2 i guarantee you they won't budge on closing costs as it is not customary in NYC.
Why would you worry about a smackdown under option 1??? Just because they paid up and lost money doesnt mean you should make them whole for it man.
Ignored comment.
Unhide
Response by truthskr10
over 13 years ago
Posts: 4088
Member since: Jul 2009
I made my offer based on p p sq ft. I included my comp work with the offer to the seller's broker. ( It helps much more if you have in building comps).
I wouldn't count on being able to nickel and dime during contract negotiations. Especially right now a "seasonally" strong seller's market. The entire time you are negotiating the contract the unit is still technically ON the market.
And how far below ask are we talking? A majority of closings Ive seen lately on SE's building pages look to be -1.5 to -4% off ask. (and by majority I just mean more than 50%) Anything up to -10% off ask, no seller can look at you cross eyed about your offer. Anything over -18% will 98% of the time be received really poorly or no response at all.
Ignored comment.
Unhide
Response by lad
over 13 years ago
Posts: 707
Member since: Apr 2009
#2 seems disingenuous to me. If I were the seller, I would walk away. I have had previous experience selling to a difficult buyer (for a very good price). In hindsight, I would've taken 5% less, kept the place on the market 3-6 months longer, or done just about anything to avoid a transaction that was difficult and contentious every step of the way. The best offer is the cleanest offer, in my opinion. If you want a better price, make it easy for the seller.
Ignored comment.
Unhide
Response by crescent22
over 13 years ago
Posts: 953
Member since: Apr 2008
I think it is very difficult to change monetary amounts post-offer acceptance unless a new issue comes up (like something breaks)- typically there is a default for who pays certain fees and any self-respecting opposing side will default to those if you try to get them to pay for something that is supposed to be on your side.
So you should do #1 but you are still approaching the issue the wrong way. You should find a second place that you want to bid on and represent that you have options and could easily go away if the seller does not want to take your bid and realize a loss.
No one knows this particular seller's exact mentality but there is a >50% chance their willingness to take a below-desired offer has more to do with their perception of real-time alternatives than what their cost is.
Ignored comment.
Unhide
Response by NYC411
over 13 years ago
Posts: 56
Member since: Oct 2009
I vote option one. It's your money, making them happy by overPaying is not going to help you.
Btw, never go in thinking you can't walk away, and be prepared to walk, or else you could overpay out of your emotional attachment. If you offer fairly and they won't budge, you should walk away and watch it. Either it will come down,nor some other guy will overpay.
Ignored comment.
Unhide
Response by Brooks2
over 13 years ago
Posts: 2970
Member since: Aug 2011
call
Keith Burkhardt
The Burkhardt Group
Ignored comment.
Unhide
Response by FreebirdNYC
over 13 years ago
Posts: 337
Member since: Jun 2007
Bid what you want to pay. If you want any concessions (you pay my closing costs, I keep your TV type stuff) include them in your original offer
Ignored comment.
Unhide
Response by noobie2boobie
over 13 years ago
Posts: 7
Member since: Jul 2012
X amount of "days on the market" doesn't mean it's overpriced; the # of days you've known about the listing is how long it's been on the market.
My vote is for Option #1.
Whatever, if you want it make what you consider to be a fair offer, your parlysis by over analysis is exhausting. Closing costs taken care of by seller? Not bloody likely. For a "$$$" unit you are nickel and diming to a fair thee well.
I think the best way to comp this unit is to look at the previous sale of the same unit, adjust for time and for renovations. Why are you looking at other apartments? Every building has its own market.
a couple of months on the market is a long time and it indicates that the place is overpriced. Priced right it would move quickly. Option 1 for sure. Option 2 i guarantee you they won't budge on closing costs as it is not customary in NYC.
Why would you worry about a smackdown under option 1??? Just because they paid up and lost money doesnt mean you should make them whole for it man.
I made my offer based on p p sq ft. I included my comp work with the offer to the seller's broker. ( It helps much more if you have in building comps).
I wouldn't count on being able to nickel and dime during contract negotiations. Especially right now a "seasonally" strong seller's market. The entire time you are negotiating the contract the unit is still technically ON the market.
And how far below ask are we talking? A majority of closings Ive seen lately on SE's building pages look to be -1.5 to -4% off ask. (and by majority I just mean more than 50%) Anything up to -10% off ask, no seller can look at you cross eyed about your offer. Anything over -18% will 98% of the time be received really poorly or no response at all.
#2 seems disingenuous to me. If I were the seller, I would walk away. I have had previous experience selling to a difficult buyer (for a very good price). In hindsight, I would've taken 5% less, kept the place on the market 3-6 months longer, or done just about anything to avoid a transaction that was difficult and contentious every step of the way. The best offer is the cleanest offer, in my opinion. If you want a better price, make it easy for the seller.
I think it is very difficult to change monetary amounts post-offer acceptance unless a new issue comes up (like something breaks)- typically there is a default for who pays certain fees and any self-respecting opposing side will default to those if you try to get them to pay for something that is supposed to be on your side.
So you should do #1 but you are still approaching the issue the wrong way. You should find a second place that you want to bid on and represent that you have options and could easily go away if the seller does not want to take your bid and realize a loss.
No one knows this particular seller's exact mentality but there is a >50% chance their willingness to take a below-desired offer has more to do with their perception of real-time alternatives than what their cost is.
I vote option one. It's your money, making them happy by overPaying is not going to help you.
Btw, never go in thinking you can't walk away, and be prepared to walk, or else you could overpay out of your emotional attachment. If you offer fairly and they won't budge, you should walk away and watch it. Either it will come down,nor some other guy will overpay.
call
Keith Burkhardt
The Burkhardt Group
Bid what you want to pay. If you want any concessions (you pay my closing costs, I keep your TV type stuff) include them in your original offer
X amount of "days on the market" doesn't mean it's overpriced; the # of days you've known about the listing is how long it's been on the market.