Listing agents use comparable market analysis (CMA), or comps in real estate industry parlance, to determine the asking price. However, buyers should also use comps, with the help of an exclusive buyer’s agent, to help formulate the right price to offer.
This is part art and part science, and at Elika Associates, we think our method, born out of years of experience, can provide you an edge in the negotiating process.
How others do it
The quality of a CMA varies widely, depending on the broker, or even the agent. Some agencies provide the recent sales in the building and or neighborhood. Even though the square footage may be similar, and it is in the same neighborhood, we suggest using this information with caution since there are differences from each building.
This also misses a wide array of information you can use. You also want to incorporate active listings and those apartments that are under contract that can be an indicator of current market sentiment.
Remember, it is important to have an apples-to-apples comparison. Aside from the size of the unit and neighborhood, you want information on the building such as its age, condition, and amenities. A similar unit in different buildings can sell for widely different prices also taking into account, floor, exposure, light, ceiling height, condition and floor plan etc.
The limits of the Internet
There are websites that provide comps, with many offering this as a free service. This is a good starting point, but not a substitute for a comprehensive analysis. A site such as Zillow provides a Zestimate of a listing, but may not be timely or accurately take into account the condition or features of the apartment you are interested in, although it tries to make adjustments. Remember, this is a program, and cannot take into account the human factor, such as a seller’s motivation.
Other sites provide recent sales in the neighborhood. As we have stated, this is only a starting point, however. To be fully prepared, it is advisable to rely on experts and deep market analysis.
The Elika way
At Elika Associates, we have a lot of experience helping buyers. We want to use our expertise to help you get the apartment of your dreams at the right price. Remember, as an exclusive buyer’s agent, we owe our fiduciary duty to you, and not the seller. Rather than relying merely on recent sales, we use a comprehensive system.
1. First, we want to determine how motivated the seller is since one that is “highly motivated” is likely more willing to negotiate. We can ascertain someone’s financial or personal situation (e.g. divorce, already purchased another home, pending foreclosure) to help determine if he/she are flexible on the price or other terms, such as closing costs.
2. Next, our agents use the current market conditions to help you. We work in the real estate market, and often know the conditions in real-time before the popular press reports on it. Currently, this is a seller’s market for New York City apartments priced up to $3 million, but we will likely know when this is changing given our work on the “front lines.”
3. We also examine the property’s conditions, including the building itself. This is a complex area, with many factors to consider. Some of these include the building’s profile, age, unit mix, ownership share of primary users versus investors, and quality of the electrical/ plumbing.
4. An Elika agent looks at the upgrades. We know which are worth paying extra for, and which ones are not. Kitchens and bathrooms traditionally have added a lot of value, but we can focus on how this affects the price. If there have not been many upgrades and many repairs are needed, and agent can advise you of the cost, which affects your offer.
5. Now, we can turn to comparable sales. The comparison has to be meaningful, and at Elika Associates, we work hard to ensure that is the case. Recent closing prices in the same neighborhood, ideally in the building where the unit is in, are used. We look to make the comparison more meaningful by searching for sales that have more similarities to your unit (bedrooms, bathrooms, amenities, etc.) Beyond recent sales, we also look at the listing price for similar units. Aside from public records, we also use private data.
Coming up with an offer is not easy. The New York City, real estate market, has been doing well in recent years, and an offer that is too low will not be taken seriously. At the same time, no one wants to overpay for a property. A comprehensive, comparable market analysis, prepared with the help of an exclusive buyer’s agent, can help you formulate a winning bid.