Accepted offer! Recent sale brings comps down

Usually a nice new mid-luxury reno (Sub zero, wolf, marble tile baths, new 5 inch+ wide floors, good custom kitchen cabinets but not Siematic etc, new PTAC/through wall ac, limited built-in closets and millwork, updated electrical, no new windows) WITHOUT much reconfiguration will cost you $300 per sq ft plus carry plus trouble (call it $100 per sq ft for that). Reconfiguration, central ac etc, add another $100 per sq ft for mid-end luxury.

Appraisals do not help much as they are mostly meant to justify the sale price by banks and can easily vary by 5-10% even in a building with direct comps due to the condition of the apartment.

Separately, are you buying a coop or condo?

Happy to give you my opinion if you email me at 300streeteasy@gmail.com.

300, Its a condo. Yes that's my guess as well, 250-300 psft for a good mid-luxury renovation.

The time to renegotiate is now, before you go into contract. Be prepared for the seller to cut you loose, though. If you're ok with walking away from the deal there's no harm in resubmitting a lower offer as long as it happens prior to signing a contract of sale. BTW unless the unit you're looking at is a brand-new, top-of-the-line renovation with high-end appliances I don't agree with your broker's math re: the premium. IMO it sounds like the broker is just trying not to lose the deal. Higher floor/better views carry their own premium--renovations come and go but the bones remain the same.

prp, Do not forget carry and trouble of reno. That is an additional $100 per sq ft minimum over actual reno cost. Higher floors do have a premium as Bramstar is saying.

When was "your" apartment renovated, and to what standard?

Renovation pricing needs to be adjusted higher from pre-covid times. Material prices are higher and the required safety protocols mean more hassle and lower productivity. Apartments that require gut renovation should trade at even more of a discount to their move-in ready peers than ever.

"Move in condition" might mean that it was last renovated 15 years ago. I do not buy the math usually thrown around here about per sq ft renovation costs (unless the unit is on the small size), and "carry" costs (particularly with rents and interest rates as low as they are now), but it is clearly time consuming, expensive and intrusive, although the latter much less so if done before ever moving in. The "trouble" expense is also for many backwards, but that depends whether you are the sort of person that buys a car off the lot, or orders exactly what you want only to wait 8 weeks and pay more. Either way, 30% is a big haircut, when you were starting with unequal units in the first instance. Unless you plan to be gone before the next renovation of the "move in ready" apartment is needed, the 30% premium (and add on higher closing costs percent for mansion tax and mortgage record tax if financed) will be hard to overcome.

In condos and coops, there is a risk that all construction activity may be shut down and then a limited number of renovations may be permitted as any one time.

Sight unseen, I'd say do the appraisal pre-contract, not as a contingency.

ali r.
{upstairs realty}

sport, What are your gut reno estimates for say a 2 bed 2 bath, decent size kitchen, 1500 sq ft apartment? No central ac etc. How long will it take from start of planning to finish?

prp, I don't think it is wise to use an appraisal as a crutch. You have a lot of leverage right now -- you've verbally agreed on terms and presumably a contract is out. If the other sale just posted then the seller must be scared out of his or her mind and wants nothing more than for you to sign. Use the new information as leverage to negotiate a lower price or move on.

The previous renovations was probably done 4 or 5 years ago.Nothing top of the line luxury but nothing shoddy either.

flarf is right. re-negotiate and hard. do it before contract signed.

+1. Your broker is not doing the job. They should be demanding you "renegotiate and hard", unless you're desperate for a place to live and this is the great opportunity you've always been waiting for. But if it's just another white box apartment, of which there at 10,000 currently for sale, you need to use the comp.

Don't delegate this to an appraiser. They work for mortgage companies to justify valuations. Only you can represent your view of values.

Remember, if you look at the parties in the deal and can't figure out who is the sucker, it's you.

Might I add that you run a real risk of the lender not giving you a loan for the full amount. We had an issue recently where due to COVID, the # of recent comps was relatively small. Pile that on top of the fact that COVID protocols have allowed the appraisers to do "desktop" appraisals without actually visiting the premises and further incorrectly analyzing the comps (wrong # of floors used for adjustment, comp has city vs water vs brick wall view, calculation errors etc.) Our first appraisal came back low, which was incredibly upsetting and stressful. I then spent at least a couple of weeks going back and forth with the bank demanding that they have their appraisal revised or redone due to a number of documented egregious errors. Now, our first appraisal report came in at less than %5 below, which we managed to argue with and get corrected. Consider whether you think you would be similarly successful if the appraisal came in at 20-30% below...

I agree with bramstar and fp.

I think it's very difficult to provide you with actionable advice when we don't know what properties we're trying to compare.

You should be able to work with your broker to put together a tangible analysis of your purchase. I would say one comp without knowing all the circumstances surrounding it does not make an entire market. Of course, it has to be considered and whether or not how tangible it really is, it certainly can provide you with some leverage for additional negotiation. I always say, nothing ventured nothing gained.

Best of luck!

Keith
TBG

I would go hardball and threaten to pull the offer. Seriously. It is a buyer's market. 30% haircut is huge.