strategies for buying real estate in Manhattan right now

offend sellers. this is not a time to make friends. survey the property. decide what you think it is worth and make an offer. if they laugh at you, politely leave your number and suggest that they have maybe 3-5 months to call and reconsider. then walk away and DO NOT CALL and give your broker strict orders to not contact the sellers again. generally the seller will come back to the table unless they're just testing the market - in which case you're not in a great position.

hang tough.

I've played this game a bit. The way you avoid offending the seller is talk to the selling broker, feel them out, hint that you're interested at much lower prices, then gauge their reaction. In several cases, I did that a few months back and got cold shoulders. Those brokers are now calling and emailing me to let me know about recent price chops on the apartments in question and how negotiable they are.

You have to do your research to determine a reasonable offer. I'd say right now look at comps that sold in the last 12-24 months, and offer something like 25-30% discount to comps. You should also do research into comparable rentals, and offer an amount that makes it comfortably cheaper to own than rent. These are just opinions, of course.

I'm interested in the Langston up at 145th street in Harlem. There was a horrible shootout where 10 people got shot on Frederick Douglas Ave from 135-144th. The shootout was reported in the media:

http://www.nydailynews.com/news/ny_crime/2008/05/28/2008-05-28_fear_bullets_and_blood_at_harlem_barbecu-3.html

I emaled that link to the sales agent (who lives nearby) and offered $150K less than the asking price.

Their reply was like acid and they said the sponsor wouldn't respond to that offer. But the same sales agent emailed me again when the price was lowered $40K. I've since gone down further in my offer, to $250K off the original asking price. The property still hasn't sold, and it's been on the market for well over 2 years.

Please, remove the notion of "offending sellers" from your mind. They will not be the least bit concerned by "offending" you by dumping their unit on you for too high a price. Submit a lo wball offer to the broker and see what happens. This is business, and after the transaction, you won't be dealing with the sellers again. If you are looking to make friends or be perceived as nice, just overpay and forget about it.

Don't worry, sellers will start capitulating big time very soon. It takes a while for reality to seep in. When it does, there will be a rush to the exits and prices will cascade down.

Why would they accept 25% below ask? Isn't it much smarter for them to lower the ask 10% and try to garner interest there, even sell an additional 5% below that, before accepting your 25% below ask? It seems like 25% below ask will *never* be accepted, at least until prices in between have been tested as asking prices.

i'm in the post office yesterday and a woman starts talking to me (long line) about an apartment she bought for $7m and hates it. She has been trying to flip it for 7 months but not one offer. She never moved in. She's living in a rental brownstone paying $18,000 a month. I don't know why I'm shocked that people have this money to pay on Rent!!!

For better or worse, I think a lot of brokers have the mentality that it's better to keep the asking price high and entertain offers that come in at 25-30% less than ask because they think buyers will feel like they're getting a deal. I think that's a naive (/arrogant) point of view by those brokers - for some reason they don't want to accept how easy it is to look at comps and rent/buy analysis to come up with what one thinks an apt is worth. Frankly, the asking price hardly enters the equation when I decide what kind of lowball bid to submit - I just form my own view on what it's worth, the seller's ask be damned. There are definitely brokers who price an apt "right" but I'd say that's currently a very small minority.

Reality check: regardless of what market does, many sellers will not be able to simply reduce prices 40% because they'll owe more on the sale than they earn due to having purchased when the market was stronger. Key to bidding in this market, if you must buy now, is to research what any unit you are interested in last sold for. If you know what the seller paid, you'll have an idea of what kind of flexibility the seller may be able to exercise in the offer price.

Still, the RE market in NYC has not yet absorbed the current broader market situation. You are jumping the gun if you think seller's will entertain a bid 30% under asking. Technically you may have all the arguments why they should, but in reality they are human and won't be the first on their block to just lop off 30%.

If you are already in the RE market for say 10 years+ and have sold a unit at recent RE market prices, then over paying a bit isn't the end of the world since you are basically playing with the houses money--that is, with the absurd profits you made on the sale of your last place. If you aren't already in the RE market and don't have money to burn, I think you are nuts to dive in and buy now. I can't think of a good argument for doing that when just months from now prices will at the very least be at least floating downward if just tumbling a bit or a lot.

Okay - as a broker and occasional buyer/seller of property, I actually do believe there are reasons not to offend sellers, even in a buyer's market. No, you are not looking to make friends, but the atmosphere surrounding a real estate transaction is pretty emotionally charged. Whether we like it or not, buying property involves other people and their feelings - we may as well acknowledge that fact.

One way to avoid offending anyone is to lavish praise on the property itself. I know a lot of people on this board advise playing it cool, but I always tell my clients that they should feel free to gush as much as they like. It costs nothing - as long as you are absolutely firm in your negotiating position.

To determine that position - as stated above - do your research. Don't calibrate your bid off the asking price; rather, really examine recently closed comps, rent vs buy ratios, whatever guidelines make sense to you. Determine what you would feel comfortable paying (in some cases, it may be only 10% off the asking price, in other cases, more like 50%!). Then present that offer as your "highest and best". And you can say "look, we really love this apartment. It's perfect for us. It would be a dream to live here. This is what we can afford."

In my experience, even if that offer is WAY below asking, that buyer will be the first to get the call when the price is reduced, and is in a better negotiating position than some equally intelligent but less effusive buyer.

tina24hour, shouldn't my first offer be lower than my "highest and best." I used to TA a negotiations class in school and leading with your "best and final" offer typically isn't well received relative to starting with something reasonably below ur best and final and then negotiating, at worst, to that level.

right now? just say "no" to buying. there, that's your strategy. it's clearly not a buyers mkt until current sellers are selling at a loss and paying for all transaction costs.

tina24hour- didn't you learn anything from Million Dollar Listing?

"Reality check: regardless of what market does, many sellers will not be able to simply reduce prices 40% because they'll owe more on the sale than they earn due to having purchased when the market was stronger."

So just wait till some of them lose their jobs and do a short sale! If every seller is selling at a profit from already ultra high prices (covering the mtg is their problem, not the future buyer's responsibility) that means it's still a sellers mkt, not a buyers market.

Special_K - if the offer is going to be a lowball, and you don't expect the seller to accept it (or even counter it) on the spot, I have found that the perception of sincerity is meaningful to a seller. I am not in any way suggesting this as a general negotiating principle! I'm just noting the emotional aspect of this particular type of transaction, and that sellers seem more willing to sell to people who demonstrate a real love for a place but can only afford to pay $X, versus a buyer who points to the state of the market and claims the apartment is only worth $X. Same offer, two different vibes.

I'm specifically speaking about resale here - not new development.

tina, i get your point. basically try to present an offer with a rationale that says "this is what we can afford and we like this place." that makes sense to me. maybe just drop the "highest and best" language then. because if you say that as a buyer, and then negotiate higher on price, then it really was neither your highest nor your best. typically the only alternative one has when they use the "best and final offer" language is to walk away. you use that language to show the other side that you are serious and that there is no more room for negotiation - otherwise your entire negotiating position collapses.

Tina24hour's advice is solid for someone who wants to come in a little low, but 1818, I fear that you are too disconnected from the current market. Anyone who writes "we need to protect ourselves and thus not buy a property which will be worth 20-40% less (??) than we would pay for it today" is NOT, at least today, a buyer.

If you truly think the market is going to crash 20-40%, then stand back, let it fall and buy at the bottom.

But realize that process of prices coming down takes time -- plasma TVs get better and cheaper every year, but that doesn't mean you can walk into Best Buy today and offer 30% off their sales price and walk out with one.

ali r.
{downtown broker}

Actually, Ali, Plasma TVs are right now being discounted heavily and quickly because everybody's bet is that LCD TVs are the future, but that unrelated to real estate. Keep it in mind when buying a TV, though.

Ali's advice is spot on. Look at it this way--why should a seller care to help you "protect" yourself at the expense of protecting himself? If you choose to buy now you are buying in today's market. Not tomorrow's. If today's prices aren't working for you and you believe they will drop then don't buy now.

Trompiloco LOL I will check back with you before surprising hubby with a new TV.

ali r.
{downtown broker}

What I've done a couple of times now is to tell the seller's broker that I really like the place, but figure the market has not yet adjusted fully. I apologize for telling them I'm not going to be much help to them and I leave an indicated level of interest. I'd only do that on places where I would sincerely buy at my level. Leaves all doors open. I've been called back, but just to alert me to an offer in the asking price. For now...

I'd offer that in any negotiation, its always best to be polite, courteous, and non-confrontational. Just be nice and stick to your guns.

> Why would they accept 25% below ask? Isn't it much smarter for them to lower the ask 10% and try to
> garner interest there, even sell an additional 5% below that, before accepting your 25% below ask?

Seems like many have tried that, and it didn't work either. Just seems like its an unwanted property.

If there are multiple apartments you'd consider, make them all the 25% offer.

You only need 1 to say yes...

> It seems like 25% below ask will *never* be accepted, at least until prices in between have been
> tested as asking prices.

Guess you've never been through a crash before...

Ali - don't hate me for saying this, but:
We had a nervy buyer offer 27% below original asking price on a property here in Brooklyn - and his offer was accepted. The seller wants to buy another property, and needs to unload his current place. So you never know!

I would not worry about the basis of the seller's investment. If they just lost their job and 60 % of their net worth -- they might take a loss because they cannot continue to maintain the property. Offer what you feel it is worth -- even if that id 60% of the ask.

There is a lot of inflating of prices going on so that they can make a "signifcant" haircut.

Smoke and mirrors...

I think Kylewest's advice of researching the last sale and doing maximum homework on the seller's situation is great. That will likely determine whether a seller would even entertain an offer way below ask.

Kylewest's argument of why the majority of sellers won't is valid. However, I think there are exceptions - i.e. situatons where the person has to sell, and doesn't owe more on the apartment that it's worth. For example, we saw an estate sale where the broker flat out said "the heirs are really anxious to sell". I think the prior owners had lived there for a long time, so the mortgage was not an issue. Plus, they'd already had a bunch of price chops, so may have considered just accepting a lowball rather than continuing down that unsuccessful road.

I agree that the majority of sellers won't accept hugely lowball offers, but I think there are at least a few exceptions who might, and if you find them, that's a potential way to protect yourself.

Ali, you are right that being afraid of 20-40% drops makes 1818 not a "real" buyer. But there's no reason he/she can't be an opportunistic buyer, prepared to buy if an exception willing to accept a lowball shows up, but happy to wait if not.

You have given me some great feedback on how to approach buying in today's market.

I, too, feel that the prices will drop. Just how much of an adjustment will eventually take place is a bit difficult to predict. We do have a situation with individuals losing jobs. Others are concerned about the affect our economy is going to have on their business/jobs. Europeans and Indians, to name just two recent buyers groups are not going to be rushing to buy in Manhattan quite like they were doing just a little while ago. Now they too face economic uncertainties in their own countries.Foreign investors as well are going to be waiting for the Manhattan Real Estate prices to adjust. As per this week-end's New York Times Real Estate section, now we also will have an over supply of newly constructed apartments in Manhattan.

In spite of all these changes the appraisals and comps will most likely take into affect the Manhattan Real Estate sold within the last 9-12 months. Well, how does that make any sense? The market has changed. Many who would normally be interested buyers have been adversely affected or are watching and waiting for a price adjustment.

I do not believe that the real estate agents who are providing comps for properties that sold even 9 months ago are doing the sellers or buyers too much justice. Of Course the real estate agent would like the seller to list the property with them. But I would think that it is infinitely better to be honest with the sellers than to mislead them and have the property just sit there while watching the asking price bleed dollars a little at a time. The actively looking buyer may feel a bit uncomfortable low balling, thus potentially reducing the pool of possible interested buyers.

There needs to be an infusion of reality into the seller's mindset from the real estate industry and the press. If you sell low now then you can buy low now, hopefully. This is true for the seller who does not have a big outstanding mortgage on a property which, when sold, will not cover the outstanding debt.

I just wonder how long it will take for the sellers to be more amenable to what seems to be a downward trend in real estate values in Manhattan?

> I do not believe that the real estate agents who are providing comps for properties that sold even 9
> months ago are doing the sellers or buyers too much justice.

UrbanDigs has been railing on this specific point for months...

And I don't just think they are screwing the sellers, they are screwing themselves. Sales volume has dropped to the floor, and its not going to come back until prices start matching reality.

I had an interesting discussion with a friend who was looking to upgrade her apartment in the next few years as the baby grows -- i said it may be worth keeping an eye on the market for a 2br over the next year or so. The problem is that she got hit in the market, her apt will sell for less -- and her feeling of job stability is much less than it used to be.

These are feelings that many are feeling and therefore you should go for the price you think....

Speaking of Plasma TV's...

I went to look for a tv at Circuit City a couple weeks ago after after looking for a half an hour asked if there were any better deals. They said there were a few open box LCDs upstairs.

Sure enough there was a 32" 1080i Samsung marked down to $779 from $899. I asked if they could do better and he suggested $650. I gave him the you can do better face and he suggested $625. I offered $599 and he said sure. So, I don't know about Plasma TV's (the beta tape of televisions) but indeed you CAN walk in and get 30% off the list price.

I imagine as metaphors go the open box special would be an estate sale apartment that needs renovation. I also think the day I bought it was the biggest point drop in the dow ever and in chatting earlier was told that sales had ground to a halt at the store.

Sorry to go back to the beginning of the thread. I cannot believe that anyone would be afraid to aggravate/offend brokes. Who cares? First of all, I am not sure if you looked for apartments when things were reversed, but I will tell you no broker cared about offending potential buyers. When each apartment had twenty potential buyers, they wre not very polite. Kharma works. Do not be overly rude, but you have the right to offer whatever you want. They have been asking ridiculous prices, describing small as charming, fire escapes as balconies,good view as onto a court yard of garbage... Trust me in ten years if the market comes back, they will not worry about offending buyers.

Short of puking on the living room carpet, I think it's pretty hard in this market for a buyer with a lot of cash to offend anyone.

I'm all with LICyuppie on this: I would only care about offending a broker inasmuch as it could affect negotiations, but, frankly, the way things are going to be in the market for the foreseeable future I don't think they'll have the luxury of acting offended. And yes, most were real assholes who looked at you like a homeless sleeping on the sidewalk if you weren't rich enough to get into a bidding war in 2005, so I have no pity for them.

"Still, the RE market in NYC has not yet absorbed the current broader market situation. You are jumping the gun if you think seller's will entertain a bid 30% under asking."

I dont think thats correct, only because there are and have been some asking prices out there that are simply crazy and there are SOME motivated sellers out there. Here's one example.

http://www.streeteasy.com/nyc/sale/326585-coop-69-fifth-avenue-flatiron-new-york

OP was not concerned about offending brokers (and shouldn't be - we can take it!). But sellers really do take this type of negotiation personally! I'd like to hear from any sellers who have been lowballed recently, or are receiving offers on their property. It's such a stressful experience, and I have seen sellers balk at even full asking price offers (in September!!) when the tone of the negotiation turned a little ugly.

ccdevi: Are you saying the price at 69 Fifth is crazy or that the seller is motivated? Anyone see this unit?

Karma should work re an individual not an aggregate. By making most sellers into heartless individuals who thought all renters were a step from homeless you're showing your prejudice

My apartment happened to go on the market the week Bear Stearns imploded. I was asking the sky and knew it--didn't know Bear would happen. I was a motivated seller who didn't care how stupid multi-price cuts look. In the beginning of August it reached the level it would sell for now. I received a bid from buyers for almost the last full ask. I knew they would pass the board in a hot sec as their income wasn't Wall Street related and they had other attractive to board qualities.

At the same time I received many bids at much lower than the asking price. Though I was much more detached than most sellers, the apartment was going into contract, and if I hadn't received that price was going to take it off the market, I was insulted. You can't help being--if I wanted that price I would have lowered the price further. Though I tried to keep it all business, it is personal--it's my apartment which is a reflection of me--and I saw every flaw the apartment had plus some that existed solely in my imagination

I would hope that most sellers express their wishes to the brokers, let them take the heat and stay out of the negotiations. It's probably good to have a buyer's broker also so they can do the back and forth

What you and I might perceive as crazy a seller might perceive as their right. Of course they would have had to be in a coma for most of this year, but....
Most sellers are more enamored with their apartments than I was. The millennium was the renovation decade

I find it interesting that some real estate agents who are anticipating offers of 20-30% lower than the asking price seem to be raising the asking price quite substantially so that they can still get the seller the money that they feel they deserve. The real estate agents continue to mislead the sellers, or perhaps they are in denial hoping that a listing will perhaps bring them some activity and a sale even if the asking price is ridiculously exaggerated.

Check out the following listing:
http://www.streeteasy.com/nyc/sale/346684-townhouse-163-west-80th-street-upper-west-side-new-york

It is now listed for $7,500,000. It was sold for 5.4M in the middle of May, 2008. Now difference is over 2M between from what it sold for and what they are listing it for in approximately three and a half months. It seems to make no sense in this market.

And the square footage has inexplicably gone up 1200sq. ft. It is possible that they bought out a rent controlled tenant and are now delivering vacant thus the price increase.

It seems like most of the suggestions are for re-sale? How about new developments? How much discount should you take from the asking price when you offer?

same question as cleanslate.... how much room do new devs have to "wiggle" even if they were willing, given their own financing issues?

I remember one recent poster to these boards saying he had an offer of 9% off turned down on a new dev in FiDi, where it seems like the market should be soft because there's a lot of overstock.

If that's to be believed (I've recently been working on resales) a buyer should be playing for single-digit discounts, maybe trying to get the developer to pay real estate transfer taxes, maybe looking for some free upgrades around the edges.

As always, the strongest negotiating position is to have a backup -- go ahead and pick out alternative properties that you would purchase if your target doesn't work out.

ali r.
{downtown broker}

As most here do, I like Ali, but she's thinking like a broker here. In this market, your best back-up is not an alternative property. Your best back-up is walking away and staying on the sidelines.

ita with you Newbuyer. I also think double digit reductions are coming in the not so distant future. Almost an implosion given the recent sales stagnation. We shall see.

Do you believe that a lot of people will become serious buyers if the prices would take a dive? How much lower do the prices need to be in order to have somewhat of a frenzy? Or is the fear of a downturn in the economy going to keep people away from making a serious commitment to buy?

I think there are people with a budget waiting for apts to come into range. Let's say they are looking for a 2br and they are around 1 million - but they drop to 750 - now the come looking. As in my case - looking for 550-600 . I've seen some jr 4s in that range but really want a small 2 br - I'll wait and see it out. I was here in the 90s and it got really ugly. I'm hoping something similar happens since prices went up on no fundamentals - just momentum

I don't think there is going to be a frenzy, pretty much no matter what. Frenzy never happens on the way down, or even at the bottom, it only happens on the way up or at the top.

That said, as I mentioned in another thread, we're looking for a good-size three-bedroom that we can legitimately make into a 4-bedroom. Until very recently, those apartments were around $2MM, or often more. I've seen a select few come down meaningfully, but most still haven't. If one comes along that we really like for $1.5MM or less, we'll strongly consider it.

So I think there are other people like cccharley and me out there. But, (1) I think there's not nearly enough of them for a frenzy and (2) each of them is looking for something specific with apartment and price criteria, so it's unlikely all of those people's criteria will be met at the same time.

NB99, I'm in the exact same boat as you.
Don't know about you, but I am a first-time buyer, which makes me even more careful about this process .... the idea of signing up for a million dollar mortgage with these shady banks with the prospect of the property value continuing to fall is not a pleasant one.
I saw a decent Classic 7 for >2MM for the first time last weekend .. I think they're coming, just need to wait, likely 6-9 months...

tripel, we're also first time buyers. I presume you meant for under $2MM? Care to show the link?

yes, i had that backwards -- under (just barely) ...needs work though, but a real 7

http://realestate.nytimes.com/sales/detail/279-543654/315-WEST-106TH-STREET-9B-NY-10025

I dunno, the 7th (maid's room) is pretty small.

I never fully got the definitions, but would this count as a real classic 7? Needs a ton of work, but is huge, with great views, and the price keeps coming down...

http://www.streeteasy.com/nyc/sale/286905-coop-10-east-end-avenue-yorkville-new-york

Nice price drops on that classic 7 on 106th street! From $2,600,000 to $1,999,999.

http://www.streeteasy.com/nyc/sale/300933-315-west-106th-street-manhattan-valley-new-york

I always thought a classic 7 was 3 BRs w a maid's room (classic 6 2 brs & MR) ..?
I went to 106th last Sunday -- it needs all new bathrooms & kitchens, but the walls & floors overall are decent. The kitchen is actually really small -- likely you'd want to rip out the maid's and make a big new kitchen. This place prob needs 100-200K in work ... I'm not considering it for that reason, plus the price still needs to be lower for me, plus the timing -- I still feel they've got more to come down and this is just a crazy time to buy right now. I'd like to see comparables listed at $1.5 next Spring/Summer, and then grab something like this for $1.3MM. That's my hope anyway...

That East End Ave one looks interesting -- I wonder about some of those sq footage claims though ...have you seen it?
Plus my kid goes to preschool in Mrngsde Heights, so I don't want to live all the way over there...

Yeah, saw the one on East End over the summer. I can't speak to the total square footage, but the dimensions of the rooms seem very legit. It was a very big apartment. Needs a ton of work, though, very ugly.

I wasn't suggesting you buy it, just pointing out what can be had for well under $2MM.

You probably know the definitions better than me. From my standpoint, a maid's room is a waste of space or close, and I certainly don't consider it a bedroom.

My Wife and ! Are looking for a place in Manahattan , just started looking , saw 2 buildings we like sheffield 57 and the platinum. Seemed nice, but price still seems high, does anyone have any recommendations

I'm a real estate agent who doesn't tend to work Midtown (a little more focus on the Village/SoHo) but I live up here right near the Sheffield. If you have seen that and the Platinum you might also want to check the Link and the Orion, they are similar "types" of building.

If your heart is set on brand-new, though, you're going to pay a premium for it.

ali r.
{downtown broker}

Thanks, Front_porch , not specifically looking for new, but a great location for use and that we can rent , thanks for the update

Top Strategy #1:

Don't.

Newbie123, then you might also want to consider the Parc Vendome -- it's a 1929/1930-era complex that takes up the block between 56th and 57th, sort of the twin to London Terrace downtown. I have lived there for about five years, and have loved it, but it is a typical prewar, with smaller windows and kitchens. Some of the list prices I have seen in the building are very ... optimistic, but if you like the building you probably won't have to pay list to close a sale. PSF, it is actually cheaper than its neighbors due to its age.

If everything is on the table for you, I would also consider CitySpire, which is an 80s building on 56th that also tends to rate a slight discount because of its age -- but some of the views are incredible.

ali r.
{downtown broker}

re Tripel's comment:
" .. I think they're coming, just need to wait, likely 6-9 months..."

Are you referring to the prices, or to the apartments themselves? Because if you see a place you like, bid the price you feel comfortable paying. The price you believe it will reach 6-9 months from now. As a broker, I keep hearing this 6-9 month (alternately, "wait till March 2009") refrain. Other brokers are hearing it too. I get the sense that spooked sellers (NOT developers, mind you) may be primed to deal right now in a way that they won't be in the Spring. The asking prices may have dropped by then, but that doesn't mean you shouldn't bid low now for a place you really love. There's very little competition from other buyers at this nanosecond - you can use that to your advantage.

If, however, you're not finding the specific apartments you like, then of course you should wait.

If your all cash and working in a field outside of wall street, the 6-9 month excuse shouldn't be used. I agree, bid what you feel like an apartment is worth now, even if its only 400 per square foot. There are no buyers out there due to mortgages at roughly 50% of value and uncertainty on wall street.