SELLERS GET REAL. TO A DEGREE.
After years of having the upper hand, sellers are getting more realistic when it comes to pricing, and are seeing the value of compromise.
The first thing Richard Steinberg and I did when we took over a listing at an Upper East Side co-op was drop the price from the initial $19.5 million ask to $17.5 million. The renovated and sprawling 4-bedroom apartment at 550 Park Avenue has stunning skyline, Central Park and Park Avenue views but had been sitting on the market. The price drop helped increase traffic to the property and engage new buyers, and re-engage old ones, too.
In the first quarter of 2017, the number of sales in Manhattan (as well as Brooklyn and Queens) jumped considerably (nearly 25%) from the prior year’s first quarter. Listing discounts and seller concessions were the main forces behind that activity.
Once sellers are attached to an unrealistic price, it can take them time to come to terms with the new (lower) value of their property, and the fact that they’re not going to get what they originally thought. Though data accessibility now means sellers are actually more responsive to and in tune with the market than they were during the 2008/2009 dip, brokers still need to present data and facts to manage sellers’ expectations right from the beginning.
With certain sellers being adamant about trying a higher price, there is sometimes little a broker can do. When faced with this challenge, I set a time limit upfront, letting the seller know they will need to reduce their price if there are no bites by a certain date. I always create an honest and transparent relationship with clients from day one, which makes the delicate, sometimes awkward conversation easier later. However my advice is to always price right from the start. Testing out a (higher) price can prolong days on market, turn buyers off, and typically get the seller less had they initially priced correctly. This was the case with my recent 3-bedroom listing in West Chelsea. My advice was an asking price of $3.75 million, but the seller insisted on listing at $3.85 to ‘test’ the market. Three months and multiple price reductions later, we accepted an offer for $3.7 million. Had we first listed at $3.75 as I had suggested, we could have taken advantage of the initial rush and momentum, and I’m certain we’d have accepted a higher offer, also saving time and agony.
Having watched record prices the past few years, sellers are having a particularly hard time slashing prices. In 2016, the median price of a Manhattan apartment hit a record $1.2 million, but that number was skewed by closings at ultra-pricey buildings like 432 Park Ave and 150 Charles Street. Last quarter, the median Manhattan home price fell to $1.1 million versus the same time last year. While prices in Brooklyn and Queens are seeing significant gains, the time it takes to sell a home has increased considerably.
When it comes to new developments, developers are not necessarily advertising price cuts, but everyone knows there is flexibility; whereas that was not the case two years ago. If it’s not a direct reduction in price, most are willing to negotiate on closing costs, storage units or parking spots. Some developers are also raising brokers’ commissions, to create more incentive for buyers’ brokers to bring their clients by.
As for pricing, many sellers have not yet received the memo that buyers did. It’s like dating someone who’s not right for you; all your friends try to tell you but you refuse to listen.
– Aren Ebrahimi, ae@artrealny.com