The moment of truth is coming sooner for New York real estate sellers, and sometimes it’s not pretty. Real estate agents are increasingly finding that sellers who hoped to make a killing on their properties need to inject their visions of profits with a dose of reality when they price their apartments, or go through the time-consuming process of marking them down.
That doesn’t mean that you’ll find a Brooklyn brownstone or a Soho loft in the bargain basement, but many sellers may be disappointed to find that their property probably won’t attract the bidding wars — or even competing bids — of years past.
“Appropriately priced units are very much in demand,” said Jorden Tepper, managing director at Manhattan Lofts. “Overpriced properties are clearly taking a little longer to sell.”
It seems the balance has shifted, some brokers say.
“At the end of the day, the market is being made by the buyer, not by the seller,” says Jacky Teplitzky, executive vice president at Prudential Douglas Elliman. “A year ago it was a different story, but now it is more equal between sellers and buyers.”
The culprits are easy to find. Inventory and interest rates are both up, and the buyers out there in the marketplace are simply taking their time as they sift through the available properties and face paying significantly more in interest than they would have if they had bought a year ago.
The shift means making adjustments to the game plan and early on establishing a rapport with sellers to enable agents to put their strategy into action.
“One of the first things we teach [our agents] is to not let the listing get stale — that’s the last thing you want to do in the market right now,” Tepper said.
The key to pricing a property correctly — and if necessary, making the price reduction process go smoothly — is educating the seller about the market, agents say.
“You need to sit down and establish a relationship with the seller. They have to see that the market is in flux at the moment.” says Eileen Richter, associate broker at the Park Slope office of Brown Harris Stevens. “One thing I tell them when the market gets a little soft is that I want them to be aware of the price I will take them to.”
For some agents, convincing sellers that it’s time to reduce a price — or that they shouldn’t ask for as much as they want in the first place — means confronting them with the cold, hard facts. If a seller really wants to sell his property, they’ll typically understand the wisdom of taking a more aggressive approach, said Pierre Moran, an agent with DJK Residential.
“I ask them: ‘you hired me to do what?'” Moran said. “I can be Mr. Nice Guy, but you didn’t hire me to be Mr. Nice Guy.”
Moran is currently marketing one of just a handful of townhouses in Battery Park City — the original asking price for the four-bedroom, 2,800-square-foot home: $3 million. Moran says original price was set by the owner against his recommendation, but it was what the seller wanted.
“I prepared the guy up front as much as I could,” Moran said. If a seller insists on a particular price, the agent says he said he’s willing to try, and if it doesn’t work, “we can adjust it.”
After two months with very little action, Moran reduced the price on the Battery Park townhouse to $2.75 million.
“Will it sell for $2.6, $2.5? We’ll see,” Moran said.
Showing sellers more comparable sales in the area or in a building, in the case of condos and co-ops, is even more important than usual, brokers and agents say. It also means monitoring activity at open houses more closely, getting detailed feedback about the property from potential buyers, as well as agents, who attend and evaluating their own listings more closely.
For example, on a day when Prudential Douglas Elliman holds several open houses for brokers in a neighborhood, the company places an agent in each property to gather feedback from attendees. It also has agents visit each property and note the differences, such as layout, the amount of light that the apartment gets and the overall condition to make sure that it’s priced right compared to other listings, Teplitzky explained. Brokers who have shown the apartment are called to get feedback about the listing and all of that information is conveyed to the seller about every two weeks.
Other strategies used when reducing prices are labeling the listings as “priced to sale,” or “just reduced.”
A year ago, when the market was hot, properties were getting snapped up so fast that opinions didn’t matter as much. Now it’s different.
Sellers “request and demand more feedback in a slower market,” said Fillmore Real Estate president and CEO John Reinhardt. “They want to know what every single person thought.”
Deciding when to take action varies.
“We don’t want a listing to get stale,” Reinhardt said. He says his rule of thumb is to consider adjusting the price if there’s been little or no action in 30 days. For some agents, it’s two weeks and others might give a listing a little more than a month.
How prices are set and reduced are just as important as timing, brokers and agents say.
If an apartment was priced at $850,000, reducing it by just $10,000 in an effort to attract more attention would probably be a waste of time, Teplitzky says. “I will not reduce it to $840,000 or $830,000. In my opinion, you are not going to get new buyers. If you reduce it in drops, it becomes a stale listing.”
Instead, she says she would probably take a listing that hadn’t gotten offers at $849,000 and reduce it to $799,000.
When sellers ask for last year’s prices
Some sellers have accepted that the housing market is no longer red hot, and others haven’t, brokers and agents say.
“You have people who think they should sell at last year’s prices,” said Eileen Richter, associate broker at the Park Slope office of Brown Harris Stevens.
Jorden Tepper, managing director at Manhattan Lofts, agrees.
“Sellers have been unfazed in a lot of cases,” Tepper said. “They believe sales will remain strong no matter what the environment is.”
Some agents feed that perception by telling sellers that they’ll get more for a property than is realistic just to get a listing, Richter says.
“I am not a pie-in-the-sky broker,” Richter said.
And some sellers are sticking to their guns on a high price because they want to make sure that if there is a negotiation that they’ll have enough room to negotiate a price that they’ll feel good about.
Sellers who have accepted that the tone of the market has changed are becoming more demanding customers — requesting more data on comparable sales and updates on the sales strategy.
In Brooklyn, the number of listings on multiple listing services has increased substantially, says Fillmore Real Estate president John Reinhardt. The increased number isn’t solely a function of the increase in inventory, he said. Instead, more sellers are requesting that their homes be put on the services so that more people will see their listing. When the market was hot, many sellers didn’t request the extra listing, he said.
“They weren’t nervous about the market so they didn’t care [about being listed],” Reinhardt said. “Now, they want to get as much exposure as they can up front.”