Race to the Bottom? Reverse Bidding War?
Regardless of what you want to call it, the story is one I will be retelling for a long time. You may not believe it, but the story is true. Today’s Covid real estate market is, well, unbelievable. Some properties are selling at or above ask, and, others, like the ones I’m about to tell a story about, engaged in a “race to the bottom” or “reverse bidding war” to try to get my client to buy.
My client had very specific criteria: a 3 bedroom condo in a 20 block radius for $2.6M or less, minimum of 1600sf, renovated. Even in today’s inventory-rich market, there were very few apartments to choose from that met this criteria.
We saw an apartment listed for $2.95M that my client loved, but it was way above his budget. This apartment had been purchased in 2015 for $2.6M, and the current owner put about $600k into renovating it. With a listing price at $2.95M, he was already going to be selling for a pretty sizeable loss.
About two days after seeing apartment 1, another 3 bedroom 3 bathroom apartment was listed in the same condo for $2.675M. This apartment was roughly the same size and had roughly the same views, but it had been renovated piecemeal over the course of the previous 10+ years with lower end finishes, and it needed a pretty significant facelift and a new kitchen.
The Race to the Bottom
My client preferred the more expensive apartment. He didn’t want to have to undergo a renovation, he was in a rush to move, and he preferred to finance as much as possible of the all-in cost. We made offers on both apartments and were ultimately $50k apart on each of them. We were at $2.65M best and final on apartment 1, and the seller was at $2.7M best and final. We were at $2.475M best and final on apartment 2, and the seller was at $2.525 best and final. My client held firm.
Apartment 2 came down to $2.475 to get the deal done. I called the agent for apartment 1 to tell her we had a deal on apartment 2, but that my client preferred apartment 1, and he would have to come down to $2.65M or he would lose my client. The seller came down. My client is opportunistic and is primarily buying because he is betting on NYC and believes this is just a dip, and he will see a return on his investment in the near term. He wanted more.
I told the agent for apartment 2 that my client got another offer accepted for an apartment he wanted more and, in order for him to do the deal on apartment 2, the seller would need to drop their price another $100k to $2.375. After some back and forth, the seller agreed! I couldn’t believe it, and neither could my client. He really still preferred apartment 1, and, so, my job was not done.
I went back to apartment 1, quite apologetically, explaining that my client couldn’t leave $100k on the table, and that if her client really wanted to do the deal, he was going to have to come down another $50k. I promised her this was the last round, and I would not go back to the other sellers if her client agreed. As you can imagine, the seller was not pleased. But, the race to the bottom continued, and we finally arrived at the “worst and final” in our “reverse bidding war” – $2.6M for apartment A. The price the seller had paid in 2015 prior to his $600k renovation. Oh, and my buyer is also getting the full benefit of a CEMA!
Is this “Race to the Bottom” Typical Today?
Definitely not. In fact, I think it’s pretty unheard of, but it’s still pretty crazy and a story that I can’t help but retell over and over. There are opportunities out there today. Not all sellers are willing to sell for significant losses or for such a steep Covid discount, but some are. As a buyer, if you are lucky enough to find one of them, jump on the opportunity. It’s almost a once in a lifetime opportunity (in my humble opinion).
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