An Inducement, Not a Barrier

Competitive bidding when pricing apartments does not serve sellers well. When several agents are competing to be chosen by a seller to represent his property, the agents sometimes suggest higher and higher listing prices to persuade the seller to choose them. We have seen this process disrupting our market for several years. In today’s environment, however, what we call “buying the listing” bodes particularly ill for sellers.

Even in the best market pricing counts. In the years since the 2008 recession buyers have displayed restraint even as they have been eager to buy. But now, with the global market issues in the EU and China impacting the perception, if not the reality, about our national fiscal well-being, pricing matters more than ever. And these competitions between agents for listings impact sellers far more intensely than before.

It’s important to recall how to price effectively. Pricing does not relate to the fantasy sellers may have, nor can most sellers dispassionately assess their own properties. The process involves rigorous analysis of the particular submarket into which the property falls, followed by an examination of current trends within that submarket. For example, the ultra-luxury condo market, with substantial oversupply relative to current demand, has begun to experience downward pricing pressure. That downward pressure seems likely to continue until such time as absorption has reduced the quantity of available units and a reasonable supply/demand balance reasserts itself.

While in an adjusting market like this one each segment displays different characteristics, there is in general more downward price pressure as values get higher. Thus there are a number of larger properties in the $7 million and up range lingering on the market with little buyer interest while smaller, less expensive properties, especially those for $2 million and under, command a lot of attention. That said, even in the lower ranges the market is a bit softer. We recently placed a very well priced, beautifully redone Upper West Side unit on the market; almost 100 people walked through the first open house. With that sort of turnout, we expected multiple offers. We got one!

In today’s marketplace, a strategy of aiming low works best. While an excessively high price drives buyers away, pricing right at value or a little below can stimulate the sort of interest which leads buyers to pay over ask. In recent months we have had several listings for which lowering the asking price, after many months with little activity, brought immediate and dramatic results. The price reduction has to be substantial (we always suggest 10%); when it is it can bring about a resurgence of interest in the property. Once people are interested, they sometimes pay as much or more than the seller had hoped to receive at the higher asking price. It is simply a question of changed perspective. Especially in this environment, the price must be an inducement, not a barrier.