A picture tells a thousand words, but when it comes to real estate, this might not be true. The technology and skill that goes into photographing real estate is so advanced that 90% of the time, listings will look better when you see them in photographs than when you see them in person. The same thing can be said for most A-list celebrities, but I digress.
Is this a bad thing? No, it is just the reality. If you are working with a top broker to sell your home, they would have hired a top-tier photographer, done post-production editing, and then staged each photo for a perfect result.
A (good) broker’s first job is to do marketing and to get buyers through the front door. Having flawless images is one of the best ways to do this (price is also a great way). Most images you see online have been edited and any imperfection removed. So, don’t be surprised when you walk into that dream home you saw online and it feels smaller, looks darker, and the floors aren’t as fresh-looking. This is just part of the new digital reality we live in.
After 30 years of combined experience pricing apartments in NYC, one thing is clear to us: pricing strategy is 70% data-based and 30% art. You can give 4 top agents the same data and they will likely come up with different values for a property. Not reassuring, I know.
This is why there is no substitute for experience. There are simply too many variables when it comes to valuing residential real estate and nearly all of the data a broker relies on is backward-looking.
At the same time, the market is a moving target. In a market that is moving up, pricing something wrong is not as tragic as pricing something wrong in market that is trending down.
Sometimes, it is hard to predict how the market will react to your valuation. In our experience, sellers are nearly always better off pricing at or slightly below the most recent comparables and allowing the market to dictate where it trades. So, why is pricing so hard? The data we rely upon is mostly closed sale date that is anywhere from 60 days to 12 months old. Since signed contract prices are not disclosed until the sale closes, there is not a lot of real-time data for us to consider. Inventory within your building, neighborhood, and price segment all play a crucial role and, of course, views, light, condition, exposure, and the most elusive buyer emotion.
To complicate pricing matters even more, in condominiums, there is an “exact” or “standard” measure of the square footage that has been approved by the AG and is listed in Schedule A of the offering plan. However, co-ops do not have an exact measure of their square footage. For the most part, the figures used by brokers are estimates, some accurate and others, not very.
Pricing a co-op without an exact measure of square footage then boils down to pricing the number of rooms that are being sold. It is like using an abacus to do your taxes. Really, it is.
You should look at pricing strategy like this: our jobs as brokers is to create the market for your home. Price is just one part of this process. We want to simply price your home at the number that is going to attract the most buyers.
After thousands of buyer showings of both furnished and unfurnished apartments, I can tell you one thing, that is absolutely certain: very few buyers have vision when it comes to an empty apartment. A good staging job will impress any buyer that comes through and will make for a more emotional connection with the property. Having sold units that were empty, and then identical units that were staged, there is simply no comparison. If you are going to spend money on anything related to a sale, put staging at the top of your list. This is something that will benefit properties at any price point.
You can tell whether a property’s been priced properly in the first three weeks. Your (agent’s) phone should be ringing often or, at the very least, you should have 5 to 7 buyers come through in the first week.
If after the first two open houses you don’t have at least 10-20 buyers come through, it is time to speak to your agent as something might be amiss.
You have shown the apartment to anywhere from 24-40 buyers and you have not received an offer? Yup, you guessed it…you are probably at least 5% off where you should be. Buyers tend to balk on submitting offers on properties that are overpriced by more than 5-7%. Instead, they just write them off as overpriced and keep an eye on StreetEasy for a price reduction.
If you are coming up at around 100 days on the market and you don’t have any offers, price may be a factor.
The bottom line is that an experienced agent will be able to “read the market” and truly understand why your unit has not sold.
At the end of the day, pricing is more of an art than a science. Generally, agents with more experience are a great benefit in this process. Even if you price your home at a level you feel is reasonable and you get only a handful of inquiries in the first three weeks, you should discuss with your agent and promptly adjust the price. Inquiries and private appointments are the best indicator of the healthiness of a listing.
With the exception of the last two weeks in August and the last two weeks in December, we rarely advise sellers to wait to list their property. There are always serious buyers out there shopping in NYC.
In the most basic of terms, your apartment is only worth what someone else is ready and willing to pay for it at a given time. The real estate market is a moving target with inventory and buyer sentiment constantly changing — so does the value of your apartment to some extent.
Accordingly, the best way to estimate market value is to put your apartment on the market and see how much buyers offer for it. The problem with this approach is the almost universal tendency to overestimate the value …and then let it linger without appropriate, quick price cuts until it gets stale and ultimately fetches less than it would have if priced correctly. The longer a home sits on the market without selling, the more likely a buyer is going to question why it hasn’t sold, and wonder if something is wrong with it.
To estimate market value as correctly as you can before listing your place, find a recent sale in your building online (look up your building’s sales history on StreetEasy.com) and then adjust for variables like views, floor, condition, windows, etc. There are lots, and lots, and lots of approaches—and mountains of guesswork–when it comes to comparing sales. At the end of the day, pricing is always more complicated than it appears at first glance. You should ideally work with an agent who will be able to educate you on the market and empower you to decide what the smart listing price is.
As a seller, there is much more of a chance of overpricing something than underpricing it. With nearly 35% of all listings selling at or over the asking price, anything that is priced even slightly low will receives multiple offers and sell for over the asking price. When in doubt, the best advice is to price your home at the level of your most relevant comparable sale. Remember: the market determines the value of your home, so price it where you will get a lot of activity in the crucial first 4 weeks and you should get great results.
It may also be helpful to attend open houses of comparable apartments in the neighborhood to see how yours stacks up, and you can make the appropriate price adjustments.
For very unique or ultra-luxury properties, you can request that your agent bring in a “pricing team” of several real estate agents to hold a focus group to get multiple agents to offer their opinions on price. If you are working with a high-level agent, this should not be a problem.
Don’t accept the first offer as-is. You may be leaving money on the table.
Always counter any offer within 10% of the asking price and don’t get insulted by a lowball offer. Every buyer has a different style of negotiating. The fact that someone took the first step and put in an offer should always be looked at with an open mind. The goal of a seller should be to see how high they can get the buyer to increase the offer. If this is a number that works for you, then great; otherwise, you don’t have to accept it, and can keep looking for other more suitable buyers. Some buyers are just “testing the waters” and may immediately come up even if your counter is just below your original asking price.
A counteroffer around 1-3% usually shows you’re being reasonable.
Always insist that the prospective buyer provide a mortgage pre-approval or proof of funds if they intend to pay cash. This should be done at the time the first offer is submitted.
Understand that negotiating for the purchase of a home is often an emotional experience for both you and the buyer. Always take a step back and put the transaction in perspective. Try relying on the two-year rule: Ask yourself if the point being negotiated will matter to you in two years. If the answer is no, it probably makes sense to give in on it.
Don’t focus exclusively on price. If you’re deadlocked, consider whether to bring other issues into play like closing costs, the purchasing timeline, and dropping contingencies. If you receive multiple bids, compare the offers closely. Are they all relying on financing or is one planning to pay cash? (In the currently fickle credit environment, all-cash is king, with all other things being mostly equal.) Do they already have their financing lined up? Are they at or near their maximum loan amount?
If you’re selling a co-op, you will also need to scrutinize the prospective purchasers to determine which is most likely to pass the board. In any co-pp purchase, a standard two-page REBNY financial statement must accompany any offer.
Don’t blab about personal information. Your broker should not be sharing your reasons for selling (such as pregnant with twins, getting a divorce or job transfer) because a well-prepared buyer’s broker will use all such information against you when negotiating a deal.
In real estate circles, an IRC known as the Section 1031 exchange isn’t just well-known, it’s downright beloved. If done within the guidelines of the code, it is a way of deferring a taxable gain on an investment property.
It works like this: under Section 1031 of the IRC, when you sell an investment property (key word here is investment)—say, a rental unit—you’re able to defer payment of capital gains taxes if you turn around and re-invest the proceeds in a similar or “like kind” asset within a certain time frame. In other words, if you sell an investment property and then use those profits to buy another investment property quickly enough, you can put off paying taxes on them.
Of course, as with most freebies in life, this potential perk comes with plenty of strings—and red tape— attached. First, note the term investment property in the definition. This means you can only pull off a 1031 with some sort of income-producing property (as opposed to your personal home or primary residence).
There are also strict rules and regulations as far as what happens to your money in-between the sale of your former property and the closing on the next one. You need to place your profits with what’s known as a “qualified intermediary,” usually your real estate attorney. The biggest mistake people make here is that they close on the sale, put the money into their own account, and then try to do an exchange. The minute you take what’s known as “constructive control” over the funds, the game’s over.
There also must be language added by the seller’s attorney to the contract of sale indicating that a 1031 exchange will be done.
Arguably the biggest snag with 1031’s is the tight time frame required to get one done. In order to comply with the rules, you have to identify a potential property to buy within 45 days of the sale closing. The simple rule is that you identify three properties you might intend to buy, and then you purchase at least one. The next deadline is that you have to actually close on the sale of your replacement property within 180 days of the sale, which can be tricky if you’re trying to use a 1031 exchange to buy in new construction buildings where delays in construction, the delivery timeline, and the status of the Certificate of Occupancy are all common.
A little bit head-spinning? Undoubtedly. But if you’re looking to get into the investment property game, the 1031 is an essential strategy to have under your belt. Again, an experienced agent should have done a number of 1031 exchange sales and will be able to recommend an attorney who knows the lay of the land.