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In The Press Back
The Real Dealby E.B. Solomont
Feb 1, 2017
NYC's resi deal killers
From indecisiveness to mortgage contingencies, the factors ruining some of today
NYC's resi deal killers
February 01, 2017
By E.B. Solomont
Mortgage contingencies. Cold feet. Better offers. Politics.
In today’s softer market, there are any number of factors that can derail a sale, according to brokers.
And both buyers and sellers are increasingly feeling emboldened to walk away at any point in the process — or to hold off on making a move at all — if something doesn’t feel right.
Douglas Wagner, director of brokerage services at Bond New York, said the lack of urgency has dragged deals on for longer, making it harder to close a transaction. “Time kills deals,” he said, noting that some buyers are now sitting on unsigned contracts and deposits for more than a week as they mull over their decision.
Level Group’s Michele Portnof said she’s learned to keep showing an apartment until she has a signed contract. “It’s never a deal until then,” she said. “Anything could happen.”
This month, The Real Deal asked brokers why deals are most often breaking down. Back in 2010, in the wake of the Great Recession, many cited low appraisals, bank delays and even Wall Street buyers, who were tapping bonus (rather than more stable salary) money to make purchases. These days, brokers have a different batch of reasons. Here are a few of the big ones.
Sitting on the fence
Buyer indecisiveness is one of the prime issues killing many of today’s deals, brokers say.
Joshua Arcus, president of Siderow Residential Group, represented a couple living in a $3,000-a-month rental who were thinking of buying. They put an offer on a two-bedroom on the Upper West Side that was asking $1.2 million, but took too long to make a next move.
“When it came to putting in a best-and-final that would win the apartment, they couldn’t step up,” said Arcus. “Having the option to stay where they are, especially since the rent wasn’t going up, versus needing to commit to buying something was a deal killer.”
Arcus said in the current market, if a unit is well priced, there’s usually a full-ask offer within 48 hours and a best-and-final round by the week’s end. So if you’re not mentally prepared, “you’re not going to win,” he said.
After a slow fall market, many of the city’s residential brokers say business picked up after Nov. 8. But the reality of a President Trump caused some would-be buyers to walk.
Bond’s Jamal Syed represented buyers this fall who backed out of their offer to buy a two-bedroom on West 82nd Street, even after the seller accepted their $1.6 million offer. “During the couple of days following the election, they got cold feet,” he said.
Now that it’s been a few months since the election, they feel ready to jump back into the market.
Despite any economic uncertainty, some sellers just won’t budge.
Level Group’s Portnof is currently representing the owner of a three-bedroom in Washington Heights who was initially insisting his apartment was worth $400,000.
Portnof listed the unit for $399,000 in November, but after several offers of $360,000, the seller refused to drop his ask. A few weeks ago, the seller finally accepted an offer of $370,000 — only to see the deal fall through when the buyer couldn’t get financing.
Buyers with cash will always be king, especially when they are going up against a buyer with a mortgage contingency.
Bond’s Syed recently represented a buyer who offered the full $1.2 million asking price for a one-bedroom co-op on Bleecker Street. The offer was accepted, but the deal was contingent on the buyer locking in financing since the co-op board required two-and-a-half years of postclosing liquidity. While the buyer was reviewing the contract, the listing broker called off the deal — an all-cash offer had come in for the same amount. Syed’s client countered with a higher offer. “They said, ‘No, sorry, the seller just doesn’t feel comfortable with a high level of financing.’”
Holding out for more
Danielle Hamburger, Town Residential’s sales and leasing manager, said she’s encountered many sellers in the last few months holding out for higher prices.
In one case, her buyer lost out on a Gramercy apartment. The apartment was asking $2.5 million, and Hamburger’s buyer offered $2.2 million. They met in the middle, but just before the contract was finalized, the seller got a higher offer and pulled out. “They wanted to make more money,” she said.