Mar. 31, 2007 - buyer’s tango for one: buy it, but without overpaying
what’s The Market Price if you set the market?
The dialogue with Larry this week in Jagger’s Law of Imperfect Lofts / life is compromise (sigh) and a buyer’s experience this week got me to thinking about buyer behavior in a Manhattan real estate world in which no one (a) wants to pay more than they ‘have to’ to have an offer accepted, or (b) likes bidding wars. (Can the real estate world in America be any different? nahhhh)
The problem, of course, is that buyers don’t know what the seller really wants (will take) and it can be difficult to determine if other buyers are really interested (and at what prices). When I get to the point of having a good rapport with buyers I will tell them that the only way to be sure what the market price is for a loft they want is to have someone else buy it. (It takes a moment for that to sink in, most times.) So they know that when they get to an apartment they want to own, they have to trust me to interpret the market data and the mumbles of the seller’s agent, and then do the best they can within whatever needs, resources, options and limits they have.
My buyers this week had bid unsuccessfully on a couple of places, then saw two new places at Sunday open houses that were similarly attractive in terms of location, size, condition and (more or less) cost. With disclosure in both places, they bid The Full Ask on both, as both seemed to be pretty popular on Sunday and had prices that were reasonable based on the comps. One immediately had other similar bids (and would likely get more), while the other wasn’t nearly as hot (and was financially more practical for them).
They bid on Monday, putting as much pressure on the seller as we could (“we have another bid out there”) and got an accepted offer on the second one late that same night. Small hiccup on Tuesday when the seller re-opened the business terms (asking for no mortgage contingency; no surprise there), which the buyers swallowed.
even decisive people can have second thoughts
Bigger hiccup on Wednesday, when the seller’s agent called with the dreaded “we had two offers above ask last night” phone call. Here’s where it got interesting.
The seller, bless his heart, was not interested in a bidding war so long as my buyers matched the slightly-higher-than-ask new price. Agent, bless her heart, had an acceptably calm answer to my question “what do I tell my buyers if you come back to me tomorrow night with yet another higher offer?” (“he wants to do the deal with your people; have them sign in a hurry”).
My buyers, bless their hearts, recognized that this is the way it can go sometimes and stepped up to the additional cost. They also said “now we don’t have to worry that we paid more than anyone else would have”. Bingo.
We kind of lucked into a situation in which they got to buy the apartment without a full-fledged bidding war, yet they have the outside comfort that the price reflects the market.
bidding has a strong emotional aspect / needing a Walk Number
It is mere Negotiations 101 that any party in a negotiation has to have a Walk Number and to be prepared to act on it. It is the rare buyer (or seller) who can actually do that, however.
Going back to Larry’s comment on Jagger’s Law of Imperfect Lofts / life is compromise (sigh), in that instance those buyers got out-bid by $175,000 long after their offer had been accepted, long after they had done their green-eye-shade work on Cost + Needed Renovations. They were also dealing with a loft that had been on the market long enough for us to believe that the market did not think it was worth as much as the asking price. (With the eternal and repeated proviso that “you never know when another buyer will come out of the woodwork”.)
So when it because apparent that they would be fighting for the loft at at least $200k more than they had figured (in great detail), those buyers walked away. I think they emotionally set the value for them at their Cost + Renovation, and had the resources to keep looking – no matter that the market price for that loft demonstrably changed.
Had they started their bidding in a competition, they might have proceeded differently, but they were not overtly in a competition from the start. They accepted that they would let someone else ‘overpay’ for that loft. They stuck to their Walk Number, bless their hearts.
Being a buyer is hard….
© Sandy Mattingly 2007
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