With the recession now in full swing, the New York City real estate market is no longer in transition mode, shifting slowly from a seller’s to a buyer’s market. It has become a full-blown buyer’s market, complete with sellers who are every bit as desperate as buyers were just two short years ago.
As prices have dropped with little end in sight – at least, in regards to the short-term – negotiations have taken on a distinctly different feel, with buyers only interested in how many of their demands will be met, not which seller’s requirements to meet.
Of course, this transition has been going on for about a year, and negotiations have been firmly weighted in favor of the buyer for about the same amount of time. There were, however, holdouts: sellers who either had the most pristine properties in the city or thought they did.
That latter category, however, is completely gone now, save for a few landlords willing to accept completely unnecessary losses for the sake of being “right” in the long run about their property. Indeed, many sellers are even going so far as to give counter-offers to offers that are a full 40% below the asking price. Such “predatory lowballing” seems to be accentuating the fall in prices, as once-confident sellers become consumed with doubts after receiving several offers a full 40% below their asking price.
Similarly, buyers were once out on their own regarding obtaining credit. Recently, however, there have been numerous examples of developers entering into agreements or strategic alliances with lenders in an attempt to attract buyers.
Legal agreements have also been experiencing restructuring in favor of the buyer over the past several months. The change is particularly striking with new New York apartment developments. It used to be that legal agreements for ownership of modern New York apartment units would be non-negotiable. Take it or leave it, confident developers would tell buyers. Now, however, contract changes can be extensive. Numerous reports have been coming in from realtors and attorneys of buyers who were initially required to put down a ten percent deposit on their new apartment but after aggressive negotiation tactics were only burdened with a one percent deposit.
This change has brought interesting structural changes to the New York City real estate market. Negotiations over contract details have brought attorneys into the fold as active parts of the deal-making. They were once there to help draw up the contract. Now, with everything from closing dates to deposits to mortgage clauses up in the air, lawyers are becoming more and more active players.
Some of these changes are merely minor, and most are just short-term adjustments to slackened demand. Many, though, are large enough to make a big difference in the pocketbooks of new buyers. This is especially true for first-time buyers who may miss opportunities for negotiation with sellers that could yield them tens of thousands of dollars of cash-in-hand.