Get Aggressive When You Find That Special Property

Posted by urbandigs

Fri Nov 13th, 2009 09:15 AM

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A: A very touchy topic to discuss in an industry where brokers are viewed as 'salesman' who are incentivized to get deals done. While I will admit that many listings are overpriced to trade fast near ask, there are times when you must know to get aggressive to land a solid product. Now when I say 'get aggressive' I don't mean go out there and throw out peak level bids and ignore the adjustment that took place in this marketplace. What I mean is, adjust your tolerance a bit during negotiations when you find a property that has those special features that are so hard to find. I'm talking about properties with superb views, amazing outdoor space, or just the perfect layout and renovation of your dreams for your needs; something that sets it apart from the pack. Let me discuss.

This post comes straight from the field. Most of my buyer clients are in the $2M - $4M price point, searching for unique loft space in trendy neighborhoods or family homes that are in the right school district that still possess the most desirable unchangeable property features. These include views, location, raw space, wood burning fireplaces, private outdoor space, etc..

It is not uncommon for me to work with a buyer for up to 6-12 months before finding the right property to go after. In these situations, we know the target market very well and can instantly determine how well any one property is priced. We also know whether or not there is any artificial inflation in unit features for marketing purposes - which is why it's never a good idea for brokers or sellers to fluff square footage to make the price look more attractive.

In the end it's always the buyers decision, but as their broker, I do my best to give honest opinions on a relative basis without swaying their decision for any one property over another; that is their call, not mine! But when you are out there looking at all the classic 6s and 7s in any one given neighborhood for a period of six months or more, its fairly easy to know a great deal for a great product when one ultimately pops up. And that is the impetus for this discussion.

When you see a product that stands out and is priced at or near where it should trade, all of a sudden the older units you already viewed seemed to 'help sell' the superb one. This is when you must:

a) overcome any emotion you might have to get a pre-determined discount off the list price
b) overcome any buy side anchoring to 'fear trade' levels or that your price point is trading down x% and your not willing to pay a penny more - we cannot deny the improvement in bids from fear trades 8-9 months ago as a liquidity driven reflation trade has taken hold
c) overcome any emotion that you are bidding against yourself

Sometimes a product is priced to sell and the strategy was to generate interest, create a sense of urgency, and get a solid deal done quickly. You and your broker should know how to do a property valuation and determine if a property is priced right. The key is to maintain discipline and avoid a situation where you let emotions drive you to bid at a level that is significantly dislocated from the current marketplace - i.e., paying peak level prices.

Nobody wants to lose a stellar product because they were not aggressive enough or unwilling to pay close to a sellers listing price, out of principle. The Manhattan real estate market is a living, shifting entity that is constantly adjusting to maintain equilibrium between buyer & seller - macro forces and psychology do play very big roles. In the end, its all about where the bids are coming in!

Here is an example: 11 Riverside Drive, Apartment 12JW

Here you have a nice sized 4-room standard 2BR property in the PS87 school zone of the Upper West Side. The only drawback is the 1-bathroom but since I have seen these lines before I know that 14JW installed a 2nd bathroom in the right closet area off the foyer; leading me to believe you can do the same upgrade to the same JW line two floors lower. The property has a western exposure with direct river views and a terrace off the living room which the kitchen has a window to. I saw 14JW earlier in 2009 which entered contract just under 2 months of the listing, and sold for just under the full ask. Another example of a solid product with excellent views that moves a bit quicker in this marketplace. Apartment 12JW was priced correctly and it showed by entering contract within 3 1/2 weeks of the listing date. I'm not sure exactly what the total cost of the 2nd bathroom install would be, maybe $30K in all or so, but a great upgrade that will pay off both in functional use for the owner and at resale. This was a product worth getting aggressive for.

Another example: 62 Beach Street, Apartment 3E

Here you have a 2,159sft 7-room loft in Tribeca with a stunning renovation, great location, corner exposures, charming cobblestone street views, and flooded with sunlight. These kinds of units usually start off with an asking price closer to $1,400-$1,500/sft, and linger on the market for a while. Finding a property with the special features, layout, and that overall trendy feel to it in this neighborhood of Manhattan is never that easy to do.

Usually you find a few things that bother you about a place that makes you want to 'pass & move on'. This one just seemed to have the right stuff. Priced at $1,273/sft, it garnered multiple bids within the first week and sold for about 3.5% under full ask. This was another product worth getting aggressive for.

I have another great example for a 7-room direct river view property with a full renovation in the UWS, but since its my client and we are in contract I will save it for after the closing. That was a deal where we acted aggressively & fast, and thankfully so as I know multiple strong offers came in when we were just days from full contract execution.

The point is if you are going to get aggressive you might as well do it for a place worth getting aggressive for! You know whether you are a serious and motivated buyer and you know your timeline to own, affordability range/comfort zone (all tied to your net worth, job security, salary, etc..), better than anyone else. So get the job done when you find that product that itches you the right way! That doesn't mean to willy nilly throw money around and pay peak level prices; that would be a mis-interpretation of this discussion. Rather, understand that it is not easy to find the perfect place in this market that meets all your needs/desires/dreams - so when you do find it, don't 'play it' the wrong way to try to secure a deal x% below the peak if you have to go a bit higher to get the deal done! In the end, you will end up paying $2M, $3M, or $4M for another property that may not have the superb features of the key property that you should have got aggressive for in the first place. Plus, you get to live in it and enjoy it!