Remember the elevator marketing challenge: describe your company in 30 seconds or less. For residential real estate agents, the challenge is describing the market in one word. Is it spotty, selective, opportunistic, declining, improving or stable?
Well, it is really all of those, depending on a person’s viewpoint, the type of apartment, the seller’s situation, the marketing strategy and, of course, location.
If I have to pick one word, I would say selective, but with a caveat: in today’s market almost every apartment stands apart.
Let’s look at some factors. Pricing is the number one issue that seems to pervade across the spectrum. Apartments priced well sell. It seems easy, but it is not.
According to the Third Quarter Prudential Douglas Elliman Market Report for Manhattan, prepared by the respected appraisal firm of Miler Samuel, provided in my newsletter, the median price was $750,000. That was an increase of 3.4 percent over the second quarter, but down 8 percent from the prior year. Sellers have to change their mindset; the real estate world is quite different from a couple of years ago.
An extreme example of this is the 32-room, 25,000-square-foot mansion comedian Eddie Murphy is trying to sell in Englewood, New Jersey. It went on the market for $30 million five years ago, and with no takers was reduced to $15 million recently. I was asked to comment by the Daily News and was quoted:
“This is happening all the way around. The buyer pool for that price range has adjusted quite a bit.” By the way, annual taxes on the house are $197,723.
Pricing has always been one of the most difficult aspects in selling an apartment. A broker must balance his or her professional expertise with the emotions of a client who thinks or wants the apartment to be worth more. Today’s buyers are savvy and usually have done some homework before making a bid. They know the prices of comparable apartments and are seeking above average product at a good price. In the current market, the initial asking price should not be determined by what the seller paid or even what it traded at a year ago. Apartments that are priced aggressively near the current market will bring bids closer to the asking price, and not twenty-five percent below. Often, the realistically priced apartment gives the buyer little wriggle room and can attract multiple bids.
In this market, I like to compare an apartment to preparing and making soup. A good soup needs time to boil and simmer for maximum flavor. An apartment needs to find its arc and level to which it hits and becomes attractive and ultimately hot or hits peak interest to the market. Every apartment is different and each has its own arc and life.
The current economic environment has created numerous owners who must sell. These sellers are more flexible in negotiations and can be less demanding. These include estate sales, foreclosures, and people who are relocating. This has opened up some opportunities in tight supply areas such as the West Village, the prime Upper East Side, and some buildings that rarely have units available.
We are also seeing changes in the boards of co-ops. Many have made their requirements more stringent, in effect, making it tougher to sell. In today’s economy, boards need to be more sensitive to the needs of the sellers. They must adjust some of the criteria, as not to endanger the economic stability of the property, but to be more realistic. For example, boards need to understand the criteria of young buyers with a good job before rejecting them due to outstanding debt they may have incurred during their college years. Likewise, a board’s concern over approving sales within the building at a softer number than what had historically traded in the building. A lower price is part of the ebb and flow of the market and, as we learned in Economics 1, a market should be allowed to reach its own level.
This, definitely, is the time for opportunities. An opportunity for smart first-time buyers to get attractive product at a good price, the opportunity for people to trade up, and the opportunity for sellers to get a fair price if they are realistic, smart and patient. Do not listen to the naysayers or those promising the world’s greatest deal. This is a selective market, take advantage of it.