Buying in New York City can be a steep learning curve: Even if you are comfortable with brokering deals in your day job, negotiating the purchase of an apartment or house can be unfamiliar.
Now that NYC's real estate market favors sellers, many buyers have to familiarize themselves with the best ways to negotiate. What to avoid? One of the obvious mistakes is to come in with an initial offer that’s well below asking without having the comparable sales data to back it up.
Successful negotiations often come down to mutually respectful relationships, so it’s important to have a broker with a good attitude and reputation. Your broker needs to be someone you trust and someone the seller’s broker can work with. You also don’t want to get hung up on a specific sales price—instead, have a price range you can work with and be able to show flexibility in areas that might be beneficial to the seller. Perhaps you can offer to pay the transfer tax, which is typically the seller’s responsibility.
Whatever you do, always have a plan for your next move in the negotiations. And make sure you don’t share too much information—particularly your motivations—to the seller’s broker when you’re viewing the place. For other mistakes to avoid, read on.
[Editor’s Note: A previous version of this article was published in April 2017. It has been updated with new information for June 2021.]
1. Don't make a lowball offer that can’t be defended
Lowball offers were more prevalent during the pandemic’s peak. If you’ve done your homework, you’ll know there are a lot of neighborhoods where the market now favors sellers—and that means bidding wars. Brooklyn and Queens have seen prices rise with listings struggling to keep up with demand. A lowball offer can mean you won’t be taken seriously, says Kobi Lahav, director of sales at Living NY.
“Lowballing in a downmarket is acceptable but you have to make sure you are still in a down market. These days in Brooklyn properties for the most part go for over asking so lowballing is not a strategy you want to deploy,” he says.
If you are coming in with a bid well below asking, you also need to have evidence that the apartment is overpriced. That means providing statistics, trends, or comparative sales—what brokers call “comps”—to justify your lowball bid. Without that, broker Michael Walker, residential sales manager at R New York, says you are just giving the seller’s broker the information that the property is desirable and it could serve them well to wait.
"Sometimes low balls are fair if the property is overpriced, but if there's a lot of activity at an open house, it's just not going to fly," says Ian Katz, founder of Ian K. Katz Group. Have a conversation with your broker so you will be able to make an informed offer accompanied by a well-reasoned analysis that makes sense to the seller.
This is where you need the help of an expert—a broker you can trust—who understands the market and can help you know what the correct price is.
2. Don't go for just any broker
Pick a broker you trust. “We are not all alike,” Walker says, who not only has negotiating expertise but has taught the subject to others. Some buyers think they just need a warm body to make an offer, he says.
Consider their training, education, and experience level as well as attitude and reputation. “There are people who have bad reputations, which don’t help their buyer’s position,” Walker says.
Find Your Next Home
Lahav says he’s managed to win some bids because the listing broker preferred to work with him as opposed to other brokers. He’s also chosen offers based on a buyer's broker because he knew the professionalism of the broker would mean he’d be less likely to have issues with the board package or other parts of the vetting process.
3. Don’t negotiate single, isolated terms
One of the biggest mistakes is to have a price in mind that you won’t budge on. Instead of focusing on price alone, Walker says it’s much more effective to negotiate a package that takes into consideration other aspects of the deal like the deposit, the contingency, or the closing specifics, like who will pay taxes and fees and how soon the deal can be done.
For example, if you don’t want to go much higher on price, perhaps you can offer a non-refundable deposit at a higher percentage to show you’re serious. Find out what else the seller wants and see if you can offer it.
“The more you learn how to create packages, the more you can sufficiently control the negotiation because there are so many outcomes that could work for you,” Walker says.
Package negotiation has been the norm in new development deals for several years. A sponsor's financing conditions gives them less latitude to lower prices so most deals involve negotiation around transfer taxes and carrying costs. When you focus exclusively on price you’re more likely to miss out, Walker says.
“We should be teaching our clients that if we negotiate in packages and ranges, it opens up a collaborative mindset,” Walker says.
This can be a steep learning curve for some buyers. "I often tell clients they need to look at it from a more collective bargaining perspective. One often needs to be willing to compromise to get the deal over the goal-line," Katz says.
A co-op purchase is particularly intricate and delicate—more so than a condo. Co-ops often have post-closing liquidity requirements or other financial requirements. If you have stellar finances, plenty of liquidity, or could even pay cash, that could put you in a strong negotiating position.
When you’re buying a co-op, condo or townhouse in New York City, expert legal representation is as critical as light, air, and water. “Protect yourself, your investment and quality of life by working with an independent lawyer who has deep experience in New York City real estate, and not necessarily the one who is referred to you by a broker involved in the transaction,” says New York City real estate attorney Steven Wagner of Wagner, Berkow & Brandt.
Among other things, your lawyer should read the minutes for issues affecting your apartment or that may increase the carrying charges, review the financials to see if the coop or condo is financially sound and check to see if there is any litigation or contingent liabilities that may result in large assessments. To schedule a free 15 minute telephone consultation with Steve Wagner, click here or call 646-780-7272.
4. Don't disappear if you haven't received a counter-offer
Staying on top of the seller's broker is important. If you make an offer but don’t follow up, you will likely lose the apartment. Lahav says when a buyer doesn’t follow up after making an offer, the seller’s agent sees a buyer who isn’t serious.
If there’s a lot of interest in the property because it is well priced, it’s even more important to stay in touch with the seller's broker.
When the seller does not counter, the buyer should go back to the seller's broker and get a sense of whether other offers have been countered. If this is the case, the buyer needs to come in with a stronger offer, within 10 percent of the asking price. If the property has been on the market for a while, buyers can afford to have more patience, but should still check in with the seller's broker on a regular basis.
5. Don't talk too much in front of the seller’s agent
When you’re viewing a place, the seller’s agent is usually showing you around. Should you say how much you love the view or how pleased you are there’s a washer/dryer? These kinds of comments are unlikely to negatively affect your negotiations.
It’s fine to ask questions but don’t show your cards. For example, it would be unwise to share your motivations for buying or anything that might be used against you. You don’t want to be identified as a buyer who has few other options—the apartment is your only choice or you have a tight deadline—these are details that can be used as leverage.
“Don’t share too much of your motivations or specific leverage items until it’s time to exchange those for something of value,” Walker says.
By discussing your financial details within earshot of the seller’s agent, you might give them reason to believe you can afford more than you initially offer—or, without knowing it you could disqualify yourself as a buyer by inadvertently underselling your qualifications.
6. Don't be rude
You don't want to introduce any additional tension into what can be a fraught process. After all, negotiations are built on relationships. Wei Min Tan, founding broker of the Castle Avenue team at R New York, says it’s a misconception that a hardball attitude gets results. “People would rather do deals with people they like,” he says.
You also want your broker to build rapport with the seller’s broker. “That rapport is going to translate into the seller’s broker’s communication with the seller—there’s nothing to lose from being nice,” Tan says.
So make sure your broker takes the time to call the listing agent and find out what their needs are and what the seller wants. “This is where tact comes in—a good versus average negotiator comes down to a question of whether they have the personality to make that conversation happen,” Walker says.
In addition, telling a seller at a showing that you are looking at other properties can backfire. “While the buyer thinks it will make the seller offer a discount, in general it just makes them look like window shoppers,” Lahav says. However, when a contract is out and the seller is dragging their feet, saying you are looking elsewhere can be a tactic to move the process forward.
Lahav compares it to dating. “Declaring you have other options on a first date, will most likely make you seem condescending and will create resentment. Making sure your serious partner understands that if you don't tie the knot soon you are out is a more acceptable tactic,” he says.
7. Don't forget your Plan B
You have very little leverage if you don’t have a backup plan, Walker says.
Your Plan B shouldn't be to give up and hunt for another apartment but to have a new strategy for your negotiation. How can you make your current offer more attractive to the seller? This is why it’s important to negotiate a package rather than just a price, Walker says.
Walker’s advice is not to rush. Make sure you’ve spent some time planning what your next move will be. Ideally your broker will have spoken to the seller’s broker and worked out what it will take to close the sale. Maybe the seller wants to rent back the apartment for a month or two or would be willing to close if you paid a higher non-refundable deposit.
8. Don't forget to write a proper offer letter
An offer is more than just a number scribbled on a piece of paper. Some brokers write the letter formally on paper with a letterhead and email it as a pdf. Your offer letter should be carefully crafted and explain the offer as well as the reasoning behind it, referencing supporting information like comparable sales.
The seller’s broker will show an offer letter to the seller so it’s in your best interests to present yourself as a serious bidder who is taking the time to produce a personalized offer letter, rather than someone who is sending out multiple formulaic offers at the same time.
With your offer letter you should include pre-approval from the bank if you're financing. Also include the standard financial disclosure statement and if you’re buying all cash, you should include a document showing proof of funds or bank statements to verify you have the money to pay.
Tan recommends creating a single pdf with all the paperwork. “What’s really bad is when a broker sends everything piecemeal—they send an offer in an email and then a follow up three days later with the pre-approval.” He says this piecemeal approach shows disorganization.
9. Don't forget the the big picture
Some buyers get so focused on negotiating the price down by $5,000-$10,000 they lose sight of the fact that all negotiations take time and can cost them money, Lahav says.
Closings are taking longer right now, particularly for co-ops, as the market picks up and management companies struggle to get questionnaires out and board applications reviewed. This can present problems for those getting a mortgage if a rate lock is going to expire. If that happens, you could either be subject to additional fees, paperwork, or even a higher rate.
"You have to do the math and see if going back and forth is going to be worth it," Lahav says.
You Might Also Like