For homes in NYC & Brooklyn, how much should I expect an asking price to come down, when I offer to pay with a single lump sum, (in cash if need

Asked by Chazpan, New York, NY Mon Jan 24, 2011

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12
Eugene Kopman, , New York, NY
Mon Jan 24, 2011
AN all cash purchase is stronger in this market then a purchase contingent on financing, but there isn't a set % that a person has in mind that they'll lower the price for a cash offer.

I have negotiated lower prices for cash offers, but every situation and seller is a different situation.

The best advice I have is...Make an Offer.

Eugene Kopman
Associate Broker
BOND New York
646-39-RE-NYC
Eugene@bondnewyork.com
1 vote
Bill Bone, Agent,
Mon Jan 31, 2011
It all depends on how the property was originally priced. Cash speaks louder because it eliminates the mortgage contingency (and uncertainty) or, in the case of buildings that don't meet Fannie & Freddie guidelines, it may be the only option. It comes down to supply and demand.
0 votes
Artem P. Les…, Agent, New York, NY
Wed Jan 26, 2011
Chazpan, it all depends what is the price range you are looking at, the areas you are looking at and the condition of the aparment/house.

Cash works well with desperate sellers or with a property that is hard to sell. Also, you might have an advantage if you are bidding on the property and your competitor is financing the purchase.

If you have further questions feel free to email me at artem.lesin@arvikgroup.com
0 votes
Joseph Hasti…, Agent, Bayside, NY
Tue Jan 25, 2011
Hello Chazpan. While I do agree with Mr. Hall on much of what he wrote, there certainly is no set amount of price that can drop on a cash offer. Each deal is separate and each negotiation different.

True, cash is indeed King and for all the reasons stated as well. Banks are much more stringent on loans but in Manhattan where so many deals are cash, even those being financed are not as dire as stated. Almost all Manhattan buyers are highly qualified buyers. The way offers are submitted here would tell any Agent/Broker if the customer is worth their time.

Getting back to discounts for cash. You can offer what you feel is right but don't go too low. That might have the seller dismissing your offer without a comback. It may also stop the seller from seriously considering any further offers from you.

True enough that a sellers motivation to sell will have influence on their decisions. Here's something else to consider. If the property is in good condition with great location, good size, reasonable maintenance, etc there may be multiple offers. There is a strong likelyhood of one or more being cash offers by other highly qualified buyers since we are talking about Manhattan and they may be higher than yours. What do you then?

I hope you are working with a broker. They can indeed help you craft a good offer based on many things. Keep in mind that once you apply specific criteria for the type of place you want to buy, there may be fewer optons that you may have thought. Good luck.
0 votes
Anna M Brocco, Agent, Williston Park, NY
Mon Jan 24, 2011
There are no set standards as to how much below listing price one should offer--in order to determine a fair price, do review comps with your agent, recently closed similar properties in the immediate area, review the data and then make a determination; keep in mind that if a property is listed on target for today's market, or slightly below, multiple offers may occur.
0 votes
jo, , Hollywood Hills, Los Angeles, CA
Mon Jan 24, 2011
NY, LA or anywhere else, it all depends on how bad the seller needs to get out of that home. Even if that person needs to get out badly, how many offers are coming in ?? Too many variables to give you an exact amount or even an approx. amount to bid and win the home you want. Basically you might think of it this way, HOW BAD DO YOU want that home?

Good luck...

Nicholas
0 votes
Mitchell Hall, Agent, New York, NY
Mon Jan 24, 2011
In NYC cash is King. Today more so than ever. Many NYC coops and condos are facing financing difficulties these days. There will be many more obstacles in the coming months. Unfortunately many buildings that have never had problems before now are.

We can thank Florida, Arizona, California, Nevada and the rest of the country for all the new rules and guidlines that are now affecting us here in NYC even though we have a strong housing market. New York was the state with the highest level of home price appreciation in the country.

New York City entered a national recession later than the rest of the country and now, we have come out of it faster and stronger than the rest of the country. Our housing market declined because of Lehman Bros the rest of the country declined or crashed because of over building, sprawl, sub prime mortgages, unqualified buyers getting mortgages and a foreclosure crises. The opposite of Manhattan where a buyer always had to be qualified. Even renting in Manhattan requires a documented income of 40x the monthly rent.

So now such NYC building practices like restrictive covenants, flip taxes, first right of refusal, an individual or entity "sponsor" owning too many units, line items, fidelity bonds etc. not to mention the buyer's qualifications have become new financing obstacles in NYC by Mannie Mae and Freddie Mac.

For a seller cash is always better. Lenders are no longer reliable. A buyer with a financing contingency can eaily walk or back out leaving the seller "holding the bag" On the other hand a cash buyer or buyer with out a mortgage contingency will lose their deposit if they change their mind.

Fortunately for Manhattan 50% of transactions are cash sales. Cash is King but an experienced buyer's broker will know how to leverage a Cash offer.

Mitchell Hall, Associate Broker
The Corcoran Group
mhall@corcoran.
corcoran.com/mhall
917-312-0924
0 votes
Bestplace2mo…, , Kingston, NY
Mon Jan 24, 2011
Hello Chazpan

Cash offers are favorably viewed by sellers mainly because the deals are more straightforward and take less time without a bank or lending institute's involvement. There's not really a direct relationship between buying in cash and a lower price per se, as with most things in real estate it depends ... a smart agent that is sharp and tuned in to the market you are looking at is hands down the best way to ensure you get the best deal.
0 votes
Mudar Humaim…, Agent, NY,
Mon Jan 24, 2011
You need a smart agent to represent you, why?
1- Do you know that a seller must pay tax on a profit, am sure you do, but it also depends on the amount they declare on their tax return.
2- do they have an option as to what amount to declare on their tax return if they receive the funds from a bank? Keep in mind the bank will declare the amount on the closing docs, so the seller has no option.
3- cash is a lot more flexible & it goes beyond the selling price.

If I were a seller I would take cash any day of the week, but I know this. Most sellers don't think about the above points, so it takes an educated agent to explain the benefits of a cash offer.
One idea is to outline these benefits when you're making your offer.
Now of course everything is w/in reason & you would have to have some info about the property being sold & whether your lower cash offer can actually benefit the seller. For example if it was the sellers primary property they already have a tax shelter of 250k, so their profits won't be taxed up to 250k. On the other Hand if you learn that the seller's profit is over 250k your cash offer might have more benefits than meets the eye! Feel free to email me if you want more info. I've been involved in many different transactions & can shed sone light for you.
0 votes
John Speaks, Agent, New York, NY
Mon Jan 24, 2011
Hi Chazpan.

You will probably do better on buildings that are not "approved". Banks are reluctant to lend on those buildings; therefore, cash will be looked on favorably. Cash will also be a big plus if the seller is looking to close quickly (although for co-ops you wll still have to be approved by the board) or if it is a new bulidng that has been unoccupied for some time. Cash also eliminates a major source of uncertainty. The seller doesn't have to worry whether you will be able to obtain a mortgage. If two people are bidding on the same building you will probably be in a better position too. The average discount from asking price is around 5%. You should be able to do a little bit better than that depending on the situation. But don't deplete your financial resources, especially if you are looking at a co-op, because you will need to have sufficient financial reserves. Co-op boards also don't look favorably on a lot of debt.

John Speaks, Bond New York, 917-697-6035.
0 votes
Jenet Levy, Agent, New York, NY
Mon Jan 24, 2011
Cazpan,
Paying cash often does give you a slight bit more flexibility in Manhattan and Brooklyn. That is because banks are taking an extremely long time to issue mortgage commitiments these days and even after issuing the commitment are taking an inordinate amount of time to clear to close. The time saved by not having to wait out the process is worth something to sellers here in NYC. I can't give you a %, it just gets you a slight bit more wiggle room, more so now than before.

What's most important, however, in getting the best price, is using a skilled agent to represent you. We know how to negotiate for you to get you the best price. In fact, using an experience agent from the start will streamline your search, get you the best price, and guide you through the entire process. You don't pay a fee, the commission comes from the seller. Sellers have a professional on their side and so should you.

Best,
Jenet Levy
Halstead Property, LLC
jlevy@halstead .com
212 381-4268
http://jenetlevy.halstead.com
0 votes
Tim Moore, Agent, Kitty Hawk, NC
Mon Jan 24, 2011
Lets turn the tables and let me ask you how much would you drop the price of a house if offered cash? Let's be clear, the cash offer really only means no loan is going to be involved and so no chance of being turned down on a loan. If you were a seller would it make much difference to you to wait a week or two to find out if the buyer can qualify for a loan or just discount the house for cash today? Many sellers don't care too much about cash, it puts money in a sellers pocket just like if they got a loan, it just might not take as long to close, but you are talking about a couple weeks.
0 votes
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