Manhattan Real Estate: Pricing in a Down Market
Manhattan Real Estate: Pricing in a Down Market
Half of what makes a successful agent is the ability to price a home effectively. According to the 4th Quarter market report, the listing discount from the final asking price of a Manhattan apartment is 12.8%. Too many properties will pad their asking price- the secret is to use listings in contract to guide your pricing. From there a good negotiator will leverage the offers to get the price you deserve, even in a down market.
Conventional wisdom says that because buyers are submitting offers that a seller could construe as a low ball, the seller should pad the price- that way the buyer can feel victorious that they successfully negotiated and the seller knows they took home their number.
Pricing in a Down Market
But that’s not how it works. Conventional wisdom is just that- conventional, average. You can make a spectacular sale in a down market- it’s all about the nuance of pricing.
The life of an overpriced listing goes something like this:
It comes onto the market and you get some traffic. There have been people waiting on the sidelines for a unit just like yours. They see your ad in the NY Times and they get excited to stop by your open house. They let you know how nice your apartment is and then you never hear from them again.
Pad the price according to average advice and you’ll have an average sale. Your listing discount will be 12.8%, the average, and your time on the market will be 204 days, the average. You will clean your house for 29.14 open houses. If you’re doing the marketing right and showing your apartment privately twice a week, that’s 58.28 private showings, all because of conventional wisdom.
In NYC there are 6,851 currently active apartments and what that means is that you don’t create the value. The three apartments in your building and the ten on your block create a relative value. The buyer that stopped by your open house may have been telling the truth- he might have really thought your apartment was nice. Not 12.8% nicer than the guy down the block, though.
Slowly over the next several weeks, traffic slows down and then you have to do a price drop. A buyer stops in and sees how long your apartment has been on the market and sees you did a price drop and he smells blood. He puts in an offer but it’s low. Perhaps you take it, perhaps you reject it- but now you are chasing the market and having an average sale.
Spectacular Sale Pricing In a Down Market
The way to have a spectacular sale is to take a leap of faith.
Using listings that are in contract as a guide (remember, a listing in contract has had real buyers recently put their name on the dotted line) price your apartment, from day one, a hair under market. The other listings will look overpriced relative to yours and multiple offers will start to come in.
A good negotiator will know how to leverage those offers against each other, without producing buyer anxiety- a dangerous by-product of a bidding war in a down market that I explained in the New York Times. That pricing will move you from a hair under market to over market. With a good negotiator who understands the market, you net far more than using the conventional, average method that leads to only slow, grueling price drops of death.
Knowing the nuances of pricing in a down market, not just repeating the same, average mistakes of conventional wisdom, will create that spectacular sale and get you the price that you want and deserve.
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