NEW YORK CITY — Open houses are bustling, bidding wars are back and buyers are on the prowl for their perfect apartment, egged on by historically low mortgage rates and record high rents.
But house hunters need to be armed and ready, real estate brokers said.
Options may be limited across Manhattan and in the hot neighborhoods of Brooklyn and Queens, where low inventory is giving sellers the upper hand and heating up the competition for contracts, according to brokers.
Manhattan’s inventory fell nearly 35 percent from the first quarter of last year to this year’s first quarter, yet the number of sales increased 6.3 percent, according to a recent sales report from Douglas Elliman. Brooklyn’s inventory fell more than 45 percent and Queens saw a 26.6 drop, bringing listing inventory to an eight-year low, according to Elliman reports.
“I’m pricing 5 to 10 percent higher than I did two months ago,” said Douglas Elliman’s Jacky Teplitzky, who works with sellers and buyers. “That’s what happens when you have so much demand and not enough supply.”
With stagnant wages and reports of smaller Wall Street bonuses, what’s driving the “frenzy” is not the traditional first-time buyers or growing families looking to trade up, she said. Rather, many are investors and foreign buyers who can make all-cash purchases.
“It’s really difficult right now,” said Jeanne McIvor, a broker with Rutenberg Realty. “I’ve been doing this 11 years, and this is the lowest I’ve seen inventory. If you missed the first open house and call up to inquire, they say ‘We have a contract offer and backup offers.’ [Prospective buyers] have to be ready to move on and not fall in love.”
She recently had a listing for a two-bedroom on the Upper West Side that had 10 offers after the first weekend of viewings. The apartment was listed at $689,000 and sold for $750,000 — in cash.
So what’s a house-hunter to do to get in on the game?
“The best thing a buyer can do is get all their ducks in a row before they start,” McIvor said.
Buyers have a lot more information at their fingertips now, brokers said. Many experts encourage buyers to look at StreetEasy, which has comprehensive property listings and market data, to understand what apartments are going for in an area so they can make an informed bid if there are multiple offers.
“You want to make sure you don’t overbid,” said Douglas Elliman executive vice president Paul Zweben, who advises buyers to take the plunge if they expect to stay put for five to seven years.
Doing legwork in advance is also critical, Teplitzky said.
“I tell buyers, 'You have to know where you want to live,'” she said. “It’s not just looking at an apartment, but walking the neighborhood.”
StreetEasy allows house hunters to use location-based searches, creating customized boundaries for neighborhoods and searching by school zone or distance to subways, Song explained. It also offers feature-based searches, such as for pre-war buildings. Buyers can even use price-based searches, tailoring their hunt for property with the biggest price cuts, tax abatements or total monthly payments, since buildings have different maintenance fees and taxes.
“To increase collaboration and convenience, we have a folders tool where you can save searches, you can save buildings that you’re watching. It goes in a folder, and you can get email updates and share that folder [with others in your family or your broker] and make comments,” Song said.
Get Financial Information in Order
Along with a pre-approved letter from a bank, buyers need to be ready with an accurate financial form when placing a bid, as well as the first two pages of their income taxes.
“In New York, in order to win an apartment, it’s not only who’s offering the highest and best offer but who is ready to go,” Teplitzky said. “Financial statements, tax returns, brokerage accounts all have to be available at their fingertips to give to the broker. They have to have it up-to-date and they have to have it with them. You can’t say, 'It’s with my accountant.'”
If the forms are wrong, buyer beware.
“The only thing a seller and seller’s broker can go on is the financial form you fill out and your pre-approved letter from the bank,” McIvor said. “At the end of the day if you win the bid and you get turned down because your form is inaccurate, they can fight for your 10 percent deposit.”
Buyers also need to be realistic about what they can spend by talking to a financial advisor or mortgage broker to understand whether it makes sense to look at co-ops or condos, which have different sets of requirements.
“You have to think about closing costs, which in New York are high. There are a lot of other expenses people don’t take into account,” Teplitzky said. “It’s not a flipping market. If you think maybe in two or three years you’ll be relocated, maybe you should rent.”
Find a Good Broker
Brokers may no longer be the ones who help buyers find the apartments, but they help them close the deal, experts said.
“Most likely the buyer is going to find the apartment. They are 24-7 online looking. The broker’s role in the search has completely changed: It’s to make the deal happen,” Teplitzky said. “They know the buildings and the boards if we’re talking about co-ops. You have to work as a team. ‘Hey I saw this building online. What do you think about this building and location?’ You ask the broker, and the broker’s job is to figure out the building, the financials, the motivation of the seller.”
Plus, she said, a sellers' broker is more apt to work with a trusted buyers’ broker.
“Let’s say I represent the seller and I have three offers. I will go not only with highest bidder but with broker I feel most comfortable with who will make the sale happen,” Teplitzky said. “Ninety-five percent of our deals are done between two brokers. So if we are in a heated market, the broker is going to choose the other broker to work with so it’s going to be the easiest and fastest.”
StreetEasy also has a tool to help buyers search for brokers in different neighborhoods and price ranges.
“Brokers used to be the information provider,” said StreetEasy’s Song. “Now that you have all this information, they are the information translator. They are going to be able to discern the neighborhood nuances by block and even by building — nuances that you won’t be able to discern from a computer screen.”
Get a Real Estate Lawyer
“Have a New York real estate lawyer lined up, not a friend of the family,” McIvor said.
Because transactions can be complicated, lawyers are often important players in the process for due diligence in reviewing contracts and titles, brokers said.
“Very often if the lawyer is not available and is a big shot giving work to paralegals, you’re better off going to someone who is ready to go and will call a seller's attorney immediately,” Teplitzky said. “No response from your lawyer can make you lose the deal.”
Look for Listings that are Back on the Market
Sometimes listings that return to the market after being taken off for a time are where you can find the best bargains.
“For the buyer who doesn’t want to jump into the fray, look for the stale listing and look for the listing that’s coming back on the market,” McIvor suggested. “Some people think, ‘Oh it’s been on the market so long, I’m not going to look there.’ But sometimes there’s something good out there and you can bargain. Plus, you’re not competing with as many buyers as on a fresh listing.”
Evaluate Your Needs and Wants
“It’s not a bad idea to make a list of what you must have,” McIvor advised. “Some people will give up light for location, or will give up space. It’s kind of important to make up a list of must-haves and what you’re flexible on.”
For instance, one couple who worked in Midtown West and had their hearts set on Brooklyn found out “Brooklyn wasn’t the bargain they thought it was,” McIvor said. So she showed them the Hudson Heights area of Washington Heights.
“They said, ‘It’s like coming home to the country. We can breathe up here,’” she recounted.
Stay Calm and Carry On
“You’ve got to be calm. You want to keep your emotions out of it, but 99 percent of the time people cannot do that,” Zweben said.
“You have to be comfortable with your number going in and that if you didn’t get [a winning bid], you can’t kick yourself. There are going to be more apartments available.”