testing a media meme in the Manhattan loft lab: low-balling and the too-low offer

your Real Estate Industrial Complex, Media Division, at work
I don’t have time to find other examples, but I am pretty sure I have seen elsewhere in the Manhattan residential real estate media / blogosphere / twitterverse a comment to the effect that one of the ‘problems’ in the market is that too many buyers are making too low offers. The example du jour is The Real Deal’s April 3 Leftover lowballing: Brokers counsel against too-low offers by Leigh Kamping-Carder. The lede and (ahem) money quote:

With the spring selling season kicking into high gear, brokers are up against an unwelcome obstacle: uninformed buyers who insist on submitting lowball offers

One agent said

that dealing with buyers who continue to offer 20 percent below asking price was the biggest impediment to closing a sale last month.

Doesn’t that sound like a listing agent who could not get a buyer up to a price the seller would accept?

Another agent sounds like a buyer agent with a series of disappointed buyers, who may have only themselves to blame:

almost all of the roughly 40 properties she showed in the fourth quarter of 2011 were in contract or subject to an accepted offer as of late March, even though some of them had been on the market for almost a year.

***

many of her buy-side clients have lost out on properties because they were either outbid or failed to submit an offer before someone else signed a deal.

“It was a very frustrating experience for my clients who began their search believing that the market was slowing down and they had leverage … but then [they] experience that’s not the case,” she said.

Bless Kamping-Carder for using some data to fill out the article; I almost said “for using some data to buttress her premise”, but … she didn’t. The data she used have to do with volume (up QoQ, down slightly YoY) and price movement (F. L. A. T., YoY), but not where buyers are bidding. Granted, there may not be any published data about bids, and she did quote that agent with “many” buyer clients who bid too low or too late.

some data is better than none
Manhattan Loft Guy loves anecdotes and agent impressions as much as the next Guy (or Gal), but there is some relevant data: the spread between clearing prices and asking prices. The smaller the spread, the greater ‘problem’ for buyers who bid low, right?

Kamping-Carder did not think to ask The Miller (as usual, the go-to guy for numbers used by Real Estate Industrial Complex, Media Division), or (apparently) to look at his quarterly report, but he knows that the spread on first quarter sales was 6.3%, compared to 4.9% the previous quarter and 4.5% the prior year. In other words, the spread is higher of late. Maybe not enough to draw the opposite conclusion, but enough to kinda sorta cast doubt that there are too many low-ball bids that cause a problem in the market, except for buyer agents who can’t earn a commission if their clients can’t close a deal.

fun with Manhattan loft numbers: into the Master List
One of my perennial Notes to Self … is to find ways to exploit the gold mine that is my Master List of Manhattan Lofts Sold Since November 2008. That list contains closing prices, asking prices, and original asking prices for downtown Manhattan loft sales between $500,000 and $5,000,000, of which there were 82 that were publicly marketed in the First Quarter (recorded as of last weekend). Voila!

The loft niche is a subset of the overall Manhattan residential real estate market (d’oh), but that’s what I’ve got. Here is a spray of data from those 82 First Quarter sales on the Master List:
 

• median sales price, as percentage of asking price:   95.14%
• number of sales 97% of asking price or higher:      25 (30% of the set of 82)
• number of sales lower than 90% of asking price:  11 (13% of the set of 82)
• number of sales greater than 92% and less than 98% of the ask:   44 (54% of the set of 82)
• number of sales at or above ask:  8 (3 at, 5 above) (10% of the set fo 82)

That eleven is intriguing. In that many cases, the buyer must have started very low, to end up with at least a 10% discount from ask. One might consider them successful low-balls. The big winner (the most successful of the successful low-balls) was the “2,248 sq ft” Manhattan loft #12A at 445 Lafayette Street (Astor Place), which closed at $2,952,925, 24.19% off an ask of $3,895,000. None of the other 11 were even 15% off.

If 13% of the Manhattan lofts sold in the First Quarter were sold to buyers who ended up no more than 90% of the ask, who is the low-ball bidder a “problem” for? Sellers without the backbone to stick closer to their asking prices, perhaps. Or listing agents who mis-perceived the attraction of their listed lofts.

Granted 82 sales is a tiny slice in a quarter in which the overall Manhattan market had 2,311 (pre The Miller), but that’s my niche, and my data. You want more, or different, numbers? Count your own, my friends.

Good Pesach to my He-bros and He-sis.

© Sandy Mattingly 2012