A buyer’s market is when oversupply lacks demand, giving buyers a definite advantage over sellers in price negotiations. For prospective buyers in New York City, now is one of the best times to buy in recent history. Housing inventory is at a seven-year high and looks set to reach new records in October as sellers come off the summer slowdown.
As units have begun to pile up, sellers and developers have been ramping up discounts and incentives to entice buyers. All this presents a perfect opportunity for new buyers. If you want to take full advantage of the situation, here’s how to make the most of a buyer’s market.
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Know the local housing market
How the housing market looks across the city will differ from how it seems on a macro level. If you know what neighborhood you wish to make a home in, then start researching it to see how things look on a local level. One block could be a buyer’s market thanks to a glut of available price reduced properties. While another could be more competitive due to a better school district or better architecture and greater sunlight. The better you know about the hyperlocal market, the greater your position in negotiations.
Talk with your buyer’s agent about the borough and specific neighborhood(s) or street(s) that are of interest. They can give you a host of information that will tell you whether it’s a buyer’s market or not. Keep a lookout for these factors:
If there’s a high number of available properties for sale, you can afford to take your time. Be sure to contrast this with the housing inventory for the past year to see how it has changed.
Lack of Appreciation
As you look at the properties on offer, take note of how their prices have changed over time. If property prices have stagnated or gone down, then that’s a good indication you’re in a buyer’s market and will have leverage in negotiations.
Days on the Market
How long have the properties in your area(s) been listed for? Those that have languished on it beyond the average days on the market are more likely to accept lower offers. The sellers need to compete with new properties coming onto the market.
Make sure your real estate buyer’s agent shows you not only the listing prices for homes but also what they’re closing for. If you can find multiple comparable properties that have sold or closed for below market value, that tells you the market is right for buyers.
Get a mortgage pre-approval
In a buyer’s market, sellers have a lot at stake. The last thing they want to do is enter into a deal with someone that can’t follow through. They’re already unhappy about having to lower their asking price, and If there’s a mortgage contingency, they’ll feel even less sure of accepting a low-ball offer.
You can make them more willing to accept a lower offer if you can show them straight away that you’re in a position to close the deal. Getting pre-approved for a mortgage in advance is the best way to do this. Just don’t get this confused with mortgage pre-qualification which is just a lenders speculation the loan amount you will be pre-approved to receive.
Cash is King
Unlike the uncertainty in the cash of a financed buyer, if you have the means of paying cash for a property, you will always, aside from a co-op, have the upper hand. Make sure to play it right though, many cash buyers believe they are the only cash buyers, which is far from the case in New York City.
Many cash buyers also play hardball, and yes this strategy can and does work, but more often than not people would prefer to deal with people they like. In the case of a co-op it is not always about the money but a combination of likability and financial discipline.
If submitting a cash offer, you can afford to submit a lower offer than a financed buyer but don’t overdo it. If you are a shark looking to feed, you’ll eventually find a fish to eat. But if you would like a particular home, then a balanced approach is the best method.
Make an offer that’s to your advantage
A smart buyer shouldn’t just focus on price; there are other advantages you can gain in a buyer’s market. A seller whose property has been on the market for some time will be more willing to accept an offer that’s more in the buyer’s favor if it means securing a deal.
For instance, make an offer contingent upon the property appraising at a specific contract price. Ask for a reasonable period to conduct due diligence and home inspection. Perhaps ask the sellers pay some of the closing costs. Play up your ability to negotiate, and you could come away with something other than a reduced price.
Steer clear of Lemons even if cheap
A great New York City apartment, in a great building in a great location, is a great place to start but keep in mind that not all apartments in a particular building would be worth buying. Just because something is cheap does not guarantee it is a great deal. Bad real estate is never worth buying no matter the cost or lack thereof. Value is not always about spending less but more about what you get for the dollar.