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You may have heard about the market slowdown that is caused by rising mortgage rates, plunging stock and cryptocurrency values, as well as concerns about layoffs, and the typically slow nature of the housing market in the summer season. You may have even heard that brokers are preparing for a “dead sales market” this summer, with buyers putting their purchase plans on hold.
If you’re a buyer on the market this summer, however, you’ll find that with less competition sellers are more willing to negotiate on price and new condo developers are willing to make deals. If you go in with all cash and are willing to work with a seller’s timetable, you can bargain even more aggressively. Here is how buyers can turn a summer slowdown to their advantage.
Find a New Condo Where the Developer Is Under Pressure
Here is why Getting into a new development early on can be an advantage: Luxury condo developers are seeing sales slow, and they also face unique timeline challenges: launching in the slow months of summer may not have been their original plan, but rather a result of supply chain shortages. It means the developer is under even more pressure than usual to meet the 51 percent threshold of condos in contract for the offering plan to be declared effective, making them more open to strike a deal. This isn’t something you’re going to know off the bat or see listed anywhere, so you’ll need to speak up. when you are looking at a new development, ask these two questions: Has the offering plan been declared effective? How many units do you need to be effective?
Look in Manhattan Neighborhoods Where There Is Excess Inventory
The slowdown is not something spread evenly across the city, so if you’re looking for a deal, you should look at Midtown and the Garment District. Both neighborhoods currently have extra inventory, which gives you room to bargain. Other neighborhoods where buyers will have more negotiating power include Inwood, Hell’s Kitchen, and the Financial District; Soho also offers opportunities for buyers willing to spend a bit more. Manhattan apartments with four or more bedrooms, which were popular during the height of the pandemic, are starting to pile up as buyers favor more affordable small apartments. Studio and one-bedrooms also have the lowest level of supply now and that category still favor sellers. Either way, don’t expect a steep discount: consider something around 7-10% a great deal.
Consider Upper Manhattan Too
If rising mortgage rates have taken away some of your purchasing power, look in Upper Manhattan, where many properties qualify for lower interest rates, which will lower your monthly payments. The government incentivizes big lenders to promote home ownership in areas such as Central Harlem and Washington Heights, and banks have mortgage lending programs that offer lower interest rates—currently around 3.75 percent—and in some cases, lower down payments and closing cost assistance, which could save buyers thousands of dollars.
Pick Your (Re)Seller Carefully
You should stay flexible, since not all sellers have recognized the change in the market yet. Your goal is to find a seller who is eager to sell versus a seller who is stubbornly holding on to their perceived value of the home, so don’t get hung up on a particular apartment if the seller is giving lots of pushback. This is where a good agent and negotiation strategy really comes into play, so be sure to work with a pro.
Go In With All Cash
If you can, of course. Cash buyers will be the first prospective buyers to experience fresh negotiability.
If you’re financing, however,
Consider an Adjustable-Rate Mortgage
This has an interest rate that adjusts over time based on the market. During the initial period—which can be five, seven, or even 10 years, however, the rate doesn’t change—and the advantage here is these rates are very low and can be refinanced into a fixed-rate or another ARM.
Look for Estate Sales, Unrenovated, and Sponsor Co-ops
When it comes to getting a discount, your focus should be on properties that the sellers need to sell. Estates, relocations, empty apartments—these are the places where the best deals are likely to be found. Co-Ops in need of renovation are also a big value play. And be sure to look for sponsor co-ops: apartments being sold by the building’s owner or the corporation that established the co-op and don't need board approval. These are ideal for buyers with less traditional incomes, like freelancers, consultants with contract work or those who are self-employed.
Accommodate a Distressed Seller’s Timeframe
Sellers who have an urgent need to sell are usually dealing with a tricky schedule. Indicating that you are willing to accommodate their needs—and bidding aggressively—is another way to capitalize on the summer slowdown. Your broker should ask pointed questions like: “Does the seller need to be out on a certain date?” or, “Does the seller have any time constraints?” to find out. Sellers may also need to stay in a property post-closing, known as a post-closing possession. Buyers can give the seller an opportunity to stay in the property for as long as necessary, as opposed to a determined amount of time. Other opportunities for negotiation include forgoing or waiving inspections and allowing sellers to remove appliances and light fixtures, without asking for a concession.
Make an Offer for a Wallflower Listing
Summer is your window of opportunity, so don’t be afraid to make an offer for listings that are lingering on the market. The best buys can likely be had on listings that have been on the market longer, and more specifically, those that need work. Look for properties that have been on the market for a minimum of three months. Here’s a strategy: focus on properties that were listed from early March to early May that had price cuts in mid-to-late May. This period overlaps with mortgage rate increases and stock market dips. That means you find sellers who are accepting realities in real time, are adjusting expectations, and are more likely to come down during a negotiation.
Simply being a buyer in today’s slower market can pose a huge advantage to you, while there is still a healthy supply and before it's obvious to everyone that the market is softer and listings start disappearing. You may not be getting a rock bottom price, but you will have the ability to shop and negotiate without undue time or price pressure from competing buyers.
Source: Brick Underground