Many home buyers in NYC are enamored by the idea of submitting a lowball offer and buying a property below market value. While this makes for a compelling fantasy, it’s largely detached from reality.
A NYC homeowner is unlikely to be oblivious to the value of their property because it’s quite easy to ascertain the fair value of a piece of real estate given the sheer density and volume of transactions in the city.
For example, sellers in medium to large condo or co-op buildings usually don’t even have to look outside their building in order to figure out their home’s value. A seller of a brownstone in Bed-Stuy can likely find a suitable sold comp (and/or a for sale sign) without having to leave their block.
As a result, the odds of unearthing a seller who is clueless as to the value of their property is exceedingly low.
Even if a seller is initially uninformed as to the value of a property, the seller’s listing agent, neighbor or a family member will surely spill the beans before your lowball offer is accepted and certainly before you have a signed contract.
If you’re buying a co-op, you have no shot of securing a lowball deal even if the seller is onboard since the co-op board will likely reject you.
But what if a seller is in desperate need of cash? Might a distressed seller entertain a lowball offer? While this isn’t implausible, the odds of catching such a seller at precisely the right time are exceedingly low.
For starters, if a property is listed, it means there are other buyers in the picture. Even a desperate seller will have full visibility on demand and implied fair value. Your lowball offer will stick out like a sore thumb.
So if you’re looking for a desperate seller, you’ll need to focus on off market listings.
If you’re willing to submit hundreds if not thousands of offers on random properties site-unseen over the course of a year or more, you might have a shot at sniping a property.
But is this really worth your time? Remember that the city is full of other opportunists who are utilizing the exact same strategy. Many of these vultures are all-cash investors, so if you’re financing, how can you compete?
Now that we’ve established why it’s highly unlikely that you’ll secure a NYC property below market value by submitting a lowball offer (especially on a property that’s listed), does it ever make sense to submit a lowball offer?
What if there’s a property you really want? Perhaps you already live there and your landlord is interested in selling. Should you wield a lowball offer as your opening move, or is this suicidal behavior?
In our opinion, submitting a lowball offer in NYC is almost always a waste of time. New Yorkers are proud people, and they don’t take kindly to perceived acts of disrespect. A lowball offer is an easy way to trigger someone’s fight or flight instincts and get yourself blacklisted.
We’ve seen it time and time again. A buyer falls in love with a property. Having not done any research on market norms beforehand, the buyer thinks it’s acceptable to send a lowball offer to start a conversation even though they’re willing to pay more.
The seller immediately gets triggered, refuses to counter and stops responding to that buyer, even after the buyer resubmits a higher offer.
Eventually, the property sells to a different buyer around the same price the original lowball bidder would have been willing to pay.
As we’ve hinted, many sellers in NYC get so offended by a lowball offer that they will essentially refuse to work with that buyer. In fact, the seller becomes more motivated than ever to sell to another buyer in order to make sure that their pride and ego are restored to pre-lowball levels.
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