Sellers get real. To a limit.
While sellers have become more receptive to price cuts, convincing them still isn’t easy
When Douglas Elliman’s Richard Steinberg took over a listing for an Upper East Side co-op last month, the first thing he did was knock $2 million off the $19.5 million asking price. The four-bedroom unit, in a pre-war building at 550 Park Avenue, had been on the market for six months. And the market, Steinberg cautioned, “is not the way it was. If you want to sell your property, you are going to have to reduce it.”
After years of calling the shots, sellers are now seeing the value of compromise. During the first quarter of the year, the number of sales in Manhattan, Brooklyn and Queens jumped 24 percent year-over-year, from 7,365 in 2016 to 9,162 in 2017. Listings discounts, which increased in every sector of the market, helped drive that activity. Sellers’ mindsets are changing, according to Jonathan Miller, the CEO of appraisal firm Miller Samuel. “Once [sellers] are anchored to an unrealistic price, it can take them a couple of years to see the light… it’s almost a mourning period that they’re not going to get what they originally thought.”
Still, convincing sellers to slash prices can be tough, brokers told The Real Deal. “Many sellers did not get the memo buyers got,” said Paul Purcell of William Raveis. “It’s like dating someone that’s not right for you — all your friends are telling you and you’re just not listening.”
While slashing an asking price is never ideal, it’s a particularly bitter pill for sellers who’ve watched the parade of record prices over the past few years. In 2016, the median price of a Manhattan apartment hit a record $1.2 million, according to CityRealty, but that figure was boosted significantly by closings at ultra-pricey developments like 432 Park Avenue and 150 Charles Street. Last quarter, the median home price in Manhattan actually fell 3 percent, to $1.1 million, compared to the same period last year. While prices in Brooklyn and Queens are still climbing to record highs, the time it takes to sell a home has increased considerably.
In many cases, people have to face the fact that their home may not fetch what it would a year ago. “Sellers are still thinking 12 months ago,” said Steinberg, who estimates prices in the high-end condo market have dropped between 10 and 15 percent. “When you see these big numbers, it’s very hard for you to resolve it in your head.”
Managing sellers’ expectations from the beginning is crucial. But, ultimately, when owners desperately want to try out a price, there’s often little brokers can do to dissuade them. Most brokers will set a time limit, however, telling their clients they’ll need to reduce their price if no one bites by a set date. Tyler Whitman, a broker with TripleMint, said that he has two different types of conversations with buyers who need to do a reduction. “There’s either an ‘I told you so’ or an ‘I told you wrong.’ Obviously, the ‘I told you so’ conversation is a lot easier to have.”
Whitman, who recently had to slash the ask on an Upper West Side apartment after a deal fell through, added that if a broker creates an honest and transparent relationship with their client, the delicate, sometimes awkward, conversation is easier.
Still, price cuts can be painful, and not only for sellers stuck on the high prices of previous years.
“[They think] ‘it’s my home, I’ve loved it and I want someone else to love it,’” said Purcell of Raveis, who last year advised one of his agents to drop a condo listing in Brooklyn after the seller repeatedly refused to reduce the price. While some brokers will let their sellers try out aspirational asking prices, Purcell said he prefers to get the price right from the start. “When you overprice, then you don’t know where the floor is…. that’s a very scary and frustrating place to be.”
Brokers spoke of “arming” themselves with market reports and comps when discussing prices with sellers, in the hope that focusing on cold, hard figures would minimize emotion. “Data and facts speak volumes, especially to people who get it,” said Leonard Steinberg of Compass, whose listing at 18 West 75th Street recently went from $19.5 to $17.5 million. Others said data accessibility now means sellers are actually more responsive to the market than they were during the slump of 2008 and 2009.
“The data is much more readily available,” said Halstead’s Ari Harkov, who recently sold an apartment in Union Square for $2.3 million — $150,000 less than what another unit in the same line sold for at the market peak in 2015. “So I think it’s harder to ignore reality today than it was maybe eight or nine years ago.”
In some cases, brokers even take their clients to see other homes at the same price point, so they have a realistic sense of the competition.
But even as sellers become more realistic, many still want to try for a higher-than-recommended price at the beginning, just to “see.” The problem is that testing out a price can prolong days on market and turn off buyers.
“They don’t believe it until they’ve had the chance to see it for themselves,” said Sotheby’s International Realty’s Lauren Kende, who has a townhouse listing at 211 East 62nd Street that was reduced from $18 million in 2015 to $13.9 million this year.
And while resales account for the largest portion of Manhattan sales by far — a total of 84 percent last quarter, according to Douglas Elliman’s latest report — new development has not been immune to price cuts, either. In January, Extell Development slashed the price of five apartments at its Carlton House development by 10 percent. One of the units, which was last asking $17.9 million, is now under contract.
Meanwhile, at DHA Capital and Continental Properties’ 12 East 13th Street, the penthouse’s price has been slashed from $30 to $16 million over the last two years. World Wide Group and Rose Associates’ 252 East 57th Street is also reducing prices, but only on a few units at a time.
“Although developers are reluctant to advertise a price cut, everyone knows: bring offers,” said Elliman’s Steinberg, adding that increased brokers’ commissions are another indication that developers are becoming more flexible on price.
Steve Rutter, who handles new development marketing for Stribling, said that even new developments that aren’t publicly cutting asking prices might still be willing to make a deal. “Even if a developer hasn’t officially reduced prices by filing an amendment with the AG, they still might be negotiable,” he said. “Some developers would rather negotiate on closing costs, storage units or parking rather than reduce prices.”
In some instances, brokers said that even a tiny price reduction can spark interest in a property. Occasionally, price reductions lead to bidding wars. In the case of some properties, they might even push the final price back up to the original ask. And having buyers and sellers on the same page is positive because it results in a higher number of transactions, which is actually a better barometer of the health of the market than pricing trends.
Still, Edward Joseph of Brown Harris Stevens, who has a co-op listing at 635 Park Avenue that the buyer recently agreed to reduce by 12 percent — to $11 million — warned that while sellers are more willing to bring prices in line with the market, buyers shouldn’t expect to score the deal of the century.
“No one’s giving away properties, that’s for sure,” he quipped.