There are several factors sellers want to keep in mind when pricing and negotiating: your home’s ideal buyer, how your submarket is performing, and your leverage position.
Who is Your Home’s Prototypical Buyer?
Fair Housing notwithstanding, if you own a one bed on the fourth floor of a walk-up building, your likely buyer is a young single or childless couple. If you own a three bedroom in a doorman building, your likely buyer is a professional, dual income family with at least one young child. If a buyer who isn’t the prototype makes you an acceptable offer, great! If a buyer who isn’t your prototype makes you an offer a bit below what you’d like, we risk little in holding out for our number. If that buyer is willing to nearly match our price, the prototypical buyer will likely be compelled to come up the remainder. Conversely, if our prototypical buyer holds the line at a number just under what we desire, we risk more in continuing to hold out; if that buyer won’t meet our price, who will?
Not only does this avoid the risk of deals falling apart at the 90 yard line when the buyer finds out from their attorney an unflattering fact about the building, it buys us credibility and trust. If the buyer trusts us, they’re more likely to consider our position more strongly during a negotiation, and more likely to continue the good momentum if an unforeseen issue were to arise during due diligence or a walk-through.
How’s the (sub)Market?
While the NYC market typically has an absorption rate of five months and average negotiability of six percent / 152 days on market, those numbers will be far higher if we’re selling a mid-90s luxury condo in Midtown, and much lower if we’re selling a two-family in Fort Greene. We should know these specs not just for NYC as a whole, but for homes like yours in your neighborhood. We should also know appreciation since your purchase or since the most recent comparable closing, and the most recent active, in-contract, and recently purchased homes comparable to yours. Pricing is as much an art as a science and innovative marketing can beat the comps, but we have to know the data thoroughly if we wish to surpass it. If you’re in a well-performing submarket and are not finding a buyer, your price is likely an issue. If you’re in a poorly performing submarket, a 5% price adjustment likely won’t improve your standing. As long as you priced where the data indicated the home is likely to trade from the outset, best to hold the line on asking price and negotiate with a buyer if necessary.
What’s Your Position?
Did we receive our first offer after a few days on market? If so, this is a great sign! There’s little risk in giving things some time to see what else transpires. However, if we get the same first offer after six weeks on-market, we’ll want to aggressively pursue it. Most listings get their highest amount of interest their first 30 days on market. After that, increasing interest means adjusting the price. If we’re negotiating multiple offers, we have a variety of options at our disposal to generate the highest and best price. If we’re negotiating with only one buyer, our strategy will be more cooperative, assuming their offer is in line with market performance.
Regarding pricing, including negotiating room in an asking price is too common a mistake. Remember: average negotiability in Manhattan is only 5.6%. If a buyer perceives a home to be priced more than 5% above value, they’ll likely pass it by.