How Does Three Years Paid Common Charges and a 10% Discount Sound?
I toured a lovely family around town this week to look at purchasing a two-bedroom pied a terre. We toured 10 properties in two days. What struck me most about my experience this week was how enthusiastic sellers brokers were about making a deal. Not enthusiastic as in begging and praying for an offer, but enthusiastic as in being aggressive with encouraging offers, implying negotiability and offering upfront incentives.
And then it hit me…at these discounts, deals are going to start happening with more and more frequency. Once deals start flowing, discounts will slowly become smaller and smaller. Let me explain….
Many of the properties we toured this were new development sales where the Sponsor was still running the sales program. All of the buildings we saw were ready for immediate occupancy. Prices ranged from $2.5 to $4M.
Within 5 minutes of being on any given tour, several of the sales agents were already offering concessions upfront of 3 years paid common charges, and one even offered 3 years paid common charges and real estate taxes and even rent to own.
Everyone told us to make an offer, others made it very clear they were negotiating. If memory serves me, one agent told us the sponsor will pretty much counter any offer. From the seller’s side, I felt the confidence that terms that were acceptable to my buyers could be reached.
Wow, It’s a good time to be a buyer.
I walked away from this week realizing that the market had a much better trajectory than many can see and those relying solely on Quarterly backward-looking market reports are not seeing things clearly. Here is why:
- The developers whose properties I toured are aggressively looking to make deals, I have no doubt that 8 to 10% discounts are fairly easy to achieve. If sellers keep aggressively negotiating the way I saw this week, a good chunk of this inventory is going to be absorbed faster than people imagine.
- As this inventory is absorbed, and as certain price points get tight, discounts will decrease more and more. When? I don’t know. But at almost five years into this correction at some point soon prices are going to compel buyers to act.
Manhattan is on sale right now. It’s a sale like I haven’t seen in 10 years.
- I don’t know when it will end but from what I saw this week it is not going to last forever. If you have any thoughts of buying in the next 12 months, this is the time to be in the market.
For those who are waiting for further decline, remember there are billions of dollars waiting on the sidelines with the same idea. Being the only offer on a property puts you in an exponentially better position than competing against other buyers also looking for a deal.
What is obvious to me about this market is that very few sellers are in a position where they NEED to sell. If the market continues to decline I do believe you will see many more sellers pull their properties from the market and wait out the storm either by renting their units or continuing to live there.
There are always ebbs and flows in the market. When it gets slow and buyers pull to the sideline- the demand doesn’t evaporate. The demand just gets pent up. Buyers are still getting married, having kids, downsizing, retiring, making more money, changing schools, and any other life reason for purchasing.
- At some point this demand for housing is going to come through the pipeline and once deals start freely flowing again the days of 10% discounts and 3 years common charges are going to be history.
Get out there and find yourself a deal.