Mar 13, 2019
Guide for Negotiating Property Price in NYC
Negotiating home price in NYC is more of an art than a science. It’s possible to negotiate on home price even after an accepted offer. However, it gets much harder to negotiate on price once contracts have been signed. We’ll explain everything you need to know about negotiating home price in NYC in this article.
Negotiating Home Price as the Seller
How much you can negotiate on your home price with prospective buyers all depends on the competitive dynamics surrounding your property and how attractively you’ve priced your listing.
If your property is over-priced, it’s likely that it’s already stale with many days on market. Worse, you may have realized your mistake too late and been forced to reduce your price late in the game.
When buyers see this, it’s overwhelmingly obvious that you have no offers or options. As a result, it’s very easy for a seller with an overpriced listing to get backed into a corner.
Pro Tip: In this situation, it may be better to simply take your property off the market and re-list your home at a later time in order to reset your day count. Your position may be irreversible otherwise, especially in a weak market where new, comparable properties constantly come onto the market at price points lower than yours.
On the other hand, if your property is priced correctly, or even better, slightly underpriced versus comparable properties on the market, then you may experience overwhelming demand with buyers scrambling over each other to see your home.
In this situation when it’s very clear that your pricing is attractive and other buyers can see the traffic you’re getting at your open houses and the large number of listing views and people who have saved your listing (i.e. statistics that are publicly available on many popular real estate search websites), then it becomes very easy for you to negotiate from a position of strength.
If you’re savvy enough to have priced your property correctly, then you’ll have the luxury of deciding between multiple interested parties and offers. It’s here that an experienced listing agent will really come in handy.
An experienced real estate listing agent will be able to deftly play interested buyers against each other and create a sense of urgency. A good seller’s agent may also hold a best and final offer auction if there are many offers on the table.
Even more deadly, a really experienced listing agent can hold a best and final offer auction when there is only one offer on the table to create the illusion of competition and to get the sole buyer to bid against themselves.
Pro Tip: Real estate in NYC is truly the Wild West and the last frontier. There are no set rules for negotiating home price in NYC except that real estate offers are not binding in NYC until contracts have been signed. Furthermore, because sellers are traditionally the last to act because they counter-sign the contract after the buyer has initially signed, sellers have a ton of power after a buyer has signed and is bound. That’s because sellers can still back out of an accepted offer, even if a buyer has signed a contract and handed over a contract deposit, as long as the seller hasn’t counter-signed the contract.
Negotiating Home Price as the Buyer
The strength of a buyer’s negotiating position primarily depends on the buyer’s need to purchase a new home. If a buyer has a lease that is expiring soon and needs to purchase a new home to move into ASAP, then the buyer may have less of a negotiating advantage due to desperation on the buyer’s part.
However, a buyer can have an incredible amount of negotiating leverage if he or she is totally nonchalant about purchasing and does not need to worry about any specific timing.
The best way to avoid appearing desperate to sellers if you’re short on time is to see as many properties as possible and to put offers in on multiple listings. Depending on whether it’s a hot market or a slow market, you may not need to be overly aggressive with your offers since you are placing multiple offers.
You can make offers with reasonable discounts to see which sellers will play ball and negotiate. And because you have many options on the table, you’ll be able to more confidently negotiate with sellers knowing that you have other options waiting for you. It’s nice to let sellers know this as well.
If on the other had you have time in your favor, then you are totally free to negotiate hard and truly walk away if sellers don’t play ball. Walking away is as effective of a negotiating tactic in the flea market as it is in negotiating home price in NYC.
If you truly don’t care about the outcome if the price isn’t right, then you’ll often find sellers coming back to you days, weeks or months down the road once they realize they can’t find another buyer.
Pro Tip: You can get a discount of $20,000 or more on the average NYC home through a buyer closing credit discreetly provided by one of our experienced, partner buyer’s brokers. Check out our handy NYC Buyer Closing Cost Calculator to see how much in closing costs you can reduce!
Negotiating Home Price After an Accepted Offer
Sellers need to be aware of the common negotiating tactic of buyers asking for a concession after an offer has already been accepted. This can happen because the buyer discovered some new issues during a home inspection or second viewing that occurred after an accepted offer. Or it may simply occur because the buyer changed his or her mind.
Remember that nothing is binding for either party until they have signed a purchase contract, as a result, you should view the entire period until a contract has been fully executed as a negotiating period.
There’s nothing preventing a buyer from submitting an attractive offer just to get it accepted, with the full intention of asking for a discount after “discovering” some new issue when he or she sees the property again, or during the buyer’s attorney’s legal and financial due diligence.
Pro Tip: Sellers need to firmly reject any demands by buyers with an accepted offer to cancel open houses and cease further showings. This tactic by particularly devious buyers is meant to isolate sellers from any potential other buyers, even though the buyer’s offer is made of air and is completely non-binding. It’s industry practice for listing agents and sellers to continue showing a property all the way until a contract is signed. It’s even possible to accept multiple offers and negotiate multiple contracts with different parties!
Negotiating Home Price After Contract Signing
It’s very difficult to negotiate home price after a purchase and sale contract has been fully executed. The only times you will see this is if a contingency is activated, such as an appraisal contingency.
For example, say that a buyer’s attorney has negotiated an appraisal contingency into a contract along with the standard financing contingency. The buyer has clearly overpaid and the appraisal comes in low. This presents an issue to both the buyer and the seller.
The buyer is disadvantaged if he or she is getting a mortgage because banks will only lend against the appraised value, not the contract price. As a result, a buyer may end up having to put down a larger down payment to make up for any shortfall between the contract price and the appraised value.
The seller is disadvantaged as well because the appraisal contingency may allow the buyer to cancel the contract and walk away with his or her contract deposit if the appraisal comes in too low. This is damaging to the seller because the seller has spent precious time on market with this one buyer, and because the deal is in contract it hasn’t been shown to other buyers since it was placed into contract.
In such a situation where one party has the right to cancel and walk away, negotiating home price after a contract has been signed might actually happen and be a good idea. Sometimes it may make more sense to give a concession on price to consummate what is otherwise a sure thing then to take your chances from the beginning all over again.
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Disclosure: Hauseit (https://www.hauseit.com) and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction. The services marketed on Hauseit.com are provided by licensed real estate brokers and other third party professional service providers. Hauseit LLC is not a licensed real estate broker nor a member of any multiple listing service (MLS).
