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For A New Market, New Math
For a new market, new math
January 26, 2009 12:45PMBy Gabby Warshawer
How much do you ask for a home when fewer and fewer deals are being inked, prices are heading down, and buyers are bargain hunting?
For many Manhattan brokers, that question is Topic A nowadays.
"Pricing is the hardest thing right now," said Richard Grossman, the executive director of sales at Halstead Property's downtown office. "It's the hardest it's been in the 26 years I've been in the industry, because there aren't enough statistics out there" to provide guidance.
Grossman and other brokers say that sales recorded in public records aren't as helpful as they used to be, since the lag time between contract signings and closings means they tend to paint a picture of what the market was like several months ago, not today.
When the market was ascendant, they say, closing prices came in handy because sellers would often take them as comps and tack on a premium for their listing, under the assumption that values had increased since those sales closed.
"The one thing we're not looking at is the prices of recently sold [property]," said Michael Signet, director of sales for Bond New York, "because, for example, a co-op from accepted offer to closing is 90 to100 days. The market has changed so drastically since then that it doesn't make sense."
In the absence of such comps, Signet said the most reliable touchstones today are in the form of similar listings currently on the market.
"If I have a one-bedroom to sell on the Upper East Side, I want to know every other one-bedroom like it that's on the market," he said. "We'll show up at [a seller's] apartment with 30 other listings that are currently on the market. And we take it from there."
Jason Haber, an agent with Prudential Douglas Elliman's Haber Team, also said that determining a listing price means casting a much wider net, data-wise, than was required a couple years ago.
"We're in uncharted waters, so [you] can't use an old map to guide you. You can't just look at recent sales comps," Haber said. "We use a variety of metrics, like looking at current neighborhood pricing and how many units are available in the building."
Haber said that when the market was more robust, "there was almost a hierarchy of information" that sellers used, and at the top of that hierarchy was recent comps.
"People used to say, 'what did 4G get six months ago?'" he said. "Now it's more of a holistic approach where you need to look at things like how many units were on the market when 4G sold."
Aside from this new calculus, brokers say they encourage sellers to list their prices at realistic asking prices.
"We've been in a seller's market for 10 years, but today it's more controlled by buyers," said Grossman. "Sellers need to listen to what buyers are saying."
And, by and large, what those buyers are saying is that they don't want to pay the same price they would have a year ago.
"We're not sugarcoating anything at all for sellers because it saves us a lot of aggravation later on," said Signet, referring to properties that sit on the market because they've been priced too high.
For many sellers, this is a bitter pill to swallow.
"We just signed an exclusive in the Chelsea area," he said. "The owner felt it was worth $650,000. We thought it was worth $575,000. He basically slammed the phone down on us when we told him that. Then he called a week later, and he said come and present your case, and he signed with us."
At the same time, a buyer's market means sellers have to gird for negotiations -- and pricing correctly often means assuming that your best offers will come at 5 to 10 percent below asking.
"You have to pad [the asking] a little because there's going to be negotiation," said Grossman, noting, however, that you don't want to be entertaining offers that are much more than 10 percent off asking.
"I don't want people to give me 20 percent off the listing," he said. "Price it correctly and the buyer will give you something in the range. If you're only getting offers that are 20 or 30 percent below market, you haven't attracted the right kind of buyer; you've attracted bottom-feeders who are only going to offer you the lowest number."
Nevertheless, brokers say they are prepping sellers to receive low offers.
"We're telling sellers that we're required by [the Real Estate Board of New York] rules to bring them all offers, but we also tell them that with every lowball Larry, there may be a buyer Bill," said Haber.
And, more than ever, brokers say they need to help sellers showcase their apartments in the best possible light.
"The basic real estate stuff we got away from because the demand was so high -- like making sure an apartment looks inviting -- we've got to do it again," said Grossman.