At the dizzying height of New York City’s real estate boom, apartment owners commonly put their homes on the market, then watched as the flood of offers — often at or above the asking price — streamed in. Buyers, meanwhile, waited anxiously for the seller’s verdict, preparing to heap tens of thousands of dollars on top of the original offer.
Now, the opposite is true, brokers say. Potential buyers are now putting very low offers — often 20 to 40 percent less than the asking price — on multiple properties at the same time, a strategy that was virtually unheard of only a few months ago. Sellers, increasingly desperate to unload their property, are countering offers they once would have considered insulting. And as lowball offers become the norm, this back-and-forth seems to be accelerating the downward slide in prices.
The strategy of simultaneous lowball
offers is “definitely becoming the trend,”
said John Gomes, a vice president at Core Group Marketing. “It used to be the reverse — one seller had multiple offers for one apartment. Now, one buyer has offers on several apartments.
“Gone are the days when the seller had a choice. The buyer is in control,” he said.
During the height of the real estate
boom, sellers typically received three to four offers in the first month, said Richard Hamilton, a senior vice president at Halstead Property, who said a client of his once received 13 offers in two days. While the offers were often a mixed bag, bidding wars were a common occurrence.
In addition, many potential buyers started with offers above the asking price.
“I have sold units many times above ask where there was only one person making an offer,” Hamilton said. “Agents encouraged their buyers to go in above ask.”
Moreover, buyers almost never made
offers on more than one apartment at once, explained Frederick Peters, president of Warburg Realty. “They didn’t do it in the past because there weren’t as many apartments on the market at the same time,”
he said.
That has changed. While representing the seller of a one-bedroom apartment in the Financial District, Gomes was startled when a potential buyer’s broker told him that her client planned to make offers at
several nearby buildings.
“She said, ‘We’re putting in multiple offers in the Financial District,'” Gomes recounted. “‘We’re looking at 20 Pine and 88 Greenwich.'”
In these situations, the starting points are often extremely low, said Gomes, who said he’s recently received offers as much as 40 percent off the listing price.
Hamilton has coined a term for these bargain hunters: “predatory buyers.”
“They’re looking for dead meat out in the desert,” said Hamilton, who recently fielded an offer 20 percent lower than the asking price for a condo at West Chelsea’s 555 West 23rd Street. “They’re looking for a desperate seller, for something they can pick up really cheap.”
Many of these buyers make offers before deciding if they’re really interested, said Corey Wecler, an associate broker at City Connections Realty. One of his clients submitted an offer in a new development before visiting the sales office. “He’d never been to the development, and wouldn’t see it until I’d submitted the offer,” Wecler said.
Even when lowball offers are accepted, many buyers are trigger-shy. Gomes represented the seller of a one-bedroom in Chelsea where a low offer was countered by his client. The potential buyers — a couple looking to purchase an apartment for their daughter — raised their price and the seller accepted, but then the couple backed out. When the owner dropped back down to the original offer, they still weren’t interested.
At the heart of this behavior is the fear that prices will continue to drop. “It almost scares the buyer to know they can get it
for such a low price,” Gomes said. “They think, ‘If I can get the seller to come down to this price, what does that mean? Maybe I should wait.'”
Peters chalks it up to simple economics. Now that inventory is building as apartment sales slow, he said, buyers can
bargain shop.
“The buyer who wants a generic apartment in a marketplace in which many of them are available is shopping for price, just as if they were going to Wal-Mart and comparing paper towels,” he said. “They can make an offer on three different properties, then see who does the best for them on price.”
Whatever the motivation, the practice has become so common that Gomes has taken to listing apartments higher than the estimated sale price in anticipation of lowball offers.
“We’ve got to price things a little bit higher, because people are going to be looking for a 15 to 20 percent discount off the bat,” he said.
The strategy creates a dilemma for brokers, who are trained to prevent buyers from making wildly unrealistic offers. Up until very recently, an offer of 20 percent — or more — below the asking price was considered unrealistic.
“I had a buyer who was jumping from apartment to apartment, and asking me to submit offers all over the map,” Wecler said. “I told him I wouldn’t do it unless he was more educated about comps. In most cases, he stepped up to things that were realistic.”
Lowballing or not, buyers’ stubborn refusal to pay listing prices appears to be having an impact on the market. Fourth-quarter market figures were not available as of press time, but Jonathan Miller, president of real estate appraisal firm Miller Samuel, estimates that co-op and condo prices in Manhattan have fallen 10 to 20 percent since mid-summer.
Perhaps in recognition of this fact, more and more brokers are encouraging sellers to consider offers at percentages that would previously have been considered ludicrously low.
“It’s really insulting,” Gomes said. “But
at the same time, it’s all about creating a
dialogue. Anytime you have someone who’s interested, you do the best you can to play nice and negotiate the deal.”
“If you can engage the buyer in conversation, you can tease them out,” Peters said, adding, “In this marketplace, buyers who are making offers are not to be treated lightly.”
Tedious though the process may be, Gomes said, it’s an inevitable part of the down cycle. “It’s the process that we all have to go through before people start making these deals,” he said. “Nobody wants to be the first person to buy in this declining
market. We just have to continue to show and be patient, and eventually, people will start buying.”