The nationwide real estate downturn has finally hit Manhattan! Contracts and closings are down 75%, compared to 1 year ago. Real estate industry publications reflect that prices are falling for Manhattan co-ops, inventory is up, up, up and new development condo buildings are now aggressively negotiating their asking prices and closing costs. In short - it’s time to buy and time for buyers to aggressively negotiate for new homes.
On the financing front, it’s more difficult for buyers to get mortgages. Not only are qualified buyers - of yesterday - failing to qualify for today’s loans, but if they do qualify, the lenders are either asking buyers to increase their deposit or appraisers are appraising apartments with built-in market reductions. i.e. - an appraiser came into our sales offices and confirmed that they’ll generally discount the appraisal value of an apartment by 1% for every month it’s been on the market.
Buyers should do the following to be in the best negotiating position:
1. Get pre-approved for a mortage. This lets you know what you can afford per month and if there are any financial skeletons in your closet that will keep you from purchasing your home.
2. Put down as much $$ as possible as a deposit. Cash is king in this market. Well-priced apartments still have multiple offers and sellers go with the strongest offer (cash offer or high deposits). Additionally, the lower you have to mortgage, the less mortgage fees you’ll have at the closing.
3. Work with a Realtor. Well-priced apartments don’t stay on the market. If you’re looking for a deal, a Realtor is going to know when they initially come on the market. They’ll also know which neighborhoods provide value and which developers and owners need to sell. In Manhattan, 98% of home sellers determine and pay for the buyer’s broker’s commission at closing. Lastly, Realtors can give buyers market information only knowledgeable to the industry professionals. They can tell you the historical and present day market numbers on your potential home, particular buildings and educated predictions on the future market.
4. Get your financial paper work and condo/co-op board paperwork ready for immediate board interviews. Getting a date for a board interview is in conjunction with contract negotiations, contract signing and final loan approval. If you want to Close and move-in w/in 2 months of your offer, you have to have everything organized and ready to go.
5. Work with a local real estate attorney, lender and Realtor. Because real estate is local, you need a local Manhattan real estate attorney, lender and Realtor. All the professionals will have historic information on the apartment you’re wanting to purchase. The best way to describe the advantages of working with local professionals is to tell you one of the problems I’ve come across in the past. I once had a buyer work with a lender who was referred to her by a friend. The lender wasn’t knowledgeable about the local market and asked me about home owner association (HOA) fees. HOA fees don’t exist in Manhattan (0%) and for this particular buyer who wanted to buy a co-op in the Bronx for $120k, HOA fees weren’t relevant. I had to refer the lender to the deal sheet that I sent, prior, and again instruct him about the nuances of local real estate terms and prices. This lender didn’t have any local offices and suggested to the buyer that she purchase a condo in the $120k budget. $120k condos are impossible in any borough in NYC (Manhattan, Bronx, Brooklyn, Queens and Staten Island). The lender then refused to lend to this buyer - after her offer was accepted by the co-op board… A local lender would have known that a $120k, 1 bedroom co-op in great condition was a steal, would have had the resources to immediately see if the cooperative was on their “approved” lending list and wouldn’t have asked me irrelevant questions. The buyer lost a great apartment, that she could afford, because of her lender.
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