Let me be the first to say it: buyer power has returned to the marketplace. After a number of years of steady price gains which have frequently left buyers chasing their chosen properties, some markets have now returned to equilibrium. The buyer once again wields considerable leverage. And sellers who remain entitled about what they “need” or “should get,” especially those who treat reasonable offers with disdain, will frequently find themselves wishing they had responded with more interest when subsequent offers come in at lower numbers.
The phenomenon of negotiability in the ultra-luxury marketplace has already been well documented in the press. With properties asking above $10 million, whether co-op or condo, trades occur regularly at 10% below the asking price, especially when the unit has logged 6 months or more on the market. With 6 to 9 room apartments on the Upper East Side, we see an increase in inventory which exercises downward pressure on all the prices. Buyers have choices, for the first time in several years, and many properties, especially those with challenges in condition or location or exposure, receive few showing requests at their original prices. Although sellers are reluctant to believe it, their agent or marketing program are rarely at fault. Marketing does not actually sell properties, its goal is simply to drive attention to them. Once the buyer finds the property, the price remains the most compelling attribute for engaging his interest. If weeks are going by with few showing requests, drop the price!
A number of our recent experiences at Warburg really brought this point home to us. Several properties, with prices from the mid-$2 millions to the mid-$5 millions, lingered on the market for a considerable number of months. When reduced appropriately between 7% and 10%, each of these properties brought interest from multiple purchasers and traded at the new asking price or a bit higher. These buyers were all already in the marketplace. They were just waiting for the properties to match their sense of value before stepping in to bid on them. The critical issue when reducing a price is to clear a major price threshold. So if you are asking $10,500,000, you need to get to a number which starts with a 9. If you are asking $3,750,000, you need to get below $3,500,000. And if you are asking $999,000, you need to get below $949,000.
Demand remains strongest in Brooklyn, where most prices continue to climb, and in the lower priced Manhattan properties. There is more inventory accumulation, and therefore more price pressure, in co-op resales on the Upper East Side and Midtown; the Upper West Side, which is always short on inventory, continues to see quick trades on most units because demand outstrips supply, especially west of Central Park West. On CPW, as on Fifth, owner ambition frequently outstrips market value, resulting in properties which, although highly desirable, don’t sell because buyers are waiting for the value proposition to make sense.
As a broker, I like a market in which negotiating power rests on both sides of the equation. With our help, today’s smart buyers push the envelope, and today’s smart sellers know when and how much to push back. It’s fair, and there’s value in it for everyone.