Where Can You Identify Leverage In a Real Estate Negotiation?

The Weekly Recap

Good morning and happy Friday! New Treasury Secretary Scott Bessent is focused on bringing down the 10-year treasury yield not the Fed rate, Equinox has become the largest retail tenant in NYC, back to office is back to normal, the Waldorf Astoria is finally having people move in after years of renovations, Bryant Park Grill is closing this Spring. 143,000 jobs were created in January lowering unemployment to 4%, US productivity continues to rise and Trump wants to close the carried interest tax deduction loophole while expanding SALT.

If you missed last weeks newsletter Do Interest Rates Even Matter Anymore, you can read that through the link.

Where Can You Identify Leverage In a Real Estate Negotiation?

In the world of real estate, success is often determined not just by what you negotiate, but by how well you understand the key points of leverage at play. Whether you are a buyer looking for the best deal, a seller aiming to maximize returns, or an investor seeking strategic advantages, identifying leverage points can mean the difference between a favorable outcome and a missed opportunity. Those who recognize and utilize leverage points effectively can tilt the scales in their favor. Here are key parts of the deal where you can identify and extract leverage.

Market Conditions- Understanding how the overall market is performing will give you a good indication of how aggressive you can be in your pricing strategy if you are a seller or how strategic you need to be when crafting an offer as a buyer. In markets where its a sellers market, buyers will be competing with others for the same property forcing them to pay higher prices than if the inverse market was taking place. In buyers markets, sellers need to be cognizant of what the market value for their home is and remove the emotional impact that a house may have on their pricing strategy. Sellers should also be aware of the overall economic barriers that may impact buyers.

Property-Specific Points- The number one leverage point you can identify when it comes to the willingness of a seller to negotiate is DOM or Days on Market. As a buyer, if you’re looking at a $1 million home and you want to offer anything more than 5% off the asking price, if the home has been on the market 6 days, the owner will tell you to kick rocks. On the other hand, if the home has been on the market for 90 days or 120 days, there’s a good chance the seller is getting exhausted and might not be as entrenched in their pricing strategy anymore.

While condition of the property is important, more often than not, the seller will price the home accordingly if its in need of a renovation, with that buyer barrier in mind to make the price more attractive. If it is a one of a kind home, the sellers will demand a premium from buyers in order to part with it.

On versus off market is another important point. A unit ON MARKET shows that the seller has began negotiations by offering the home at a particular price, while a home OFF MARKET may carry a higher price point since the seller has not shown a willingness to sell and in order to do so, would need to be incentivized beyond the market value of the property.

Financing and Offer Terms- Strong offer terms aren’t just based on the price. A full ask offer for a home could be a loser to another offer that is all cash and looking to close within 30 days but is 2-3% off of the asking price. Cash is king and in a majority of instances, cash deals will beat out financing deals. I never advise a client who is financing to waive their mortgage contingency because you always want some level of insurance that you can get your deposit back if a bank cant lend to you, but the more contingencies you add to an offer the less attractive the offer becomes. Also, the more money you are willing to put down either as a deposit to be in escrow or as a higher percentage of the overall purchase price will also give you a competitive advantage.

As a buyer, you can never understand the psychology of a seller but there are ways to make your offer more attractive to compete in sellers markets. As a seller, the goal is to sell your home for the most amount of money in the shortest amount of time, the best way to achieve that is to be realistic with your pricing strategy and to remove the emotion from the transaction of the asset.

Market Performance

Here are how some other indexes and asset classes have performed as of this morning’s opening bell.

NYC Market Update

Here is a view of new inventory that has come onto the NYC market over the past WEEK as well as newly signed contracts in Manhattan.

Mortgage Rate Update

The 30-year fixed-rate mortgage decreased this week after remaining flat the past two weeks. Rates have remained stable over the last month as the economy remains on firm footing. Even though rates are higher YoY, over the last two weeks purchase applications have increased modestly above where they were this time last year showing there is more demand in the market.

News You Can Use

• Bessent Says Trump Wants Lower 10-Year Yields, Not Fed Cuts Bloomberg

• NYC Office Demand Is Finally Back to Normal CNBC

• New Inflation Reading Reinforces Fed’s Go-Slow Strategy Yahoo Finance

• Global Hedge Funds Dump Everything but Real Estate Stocks Reuters

• Blackstone Sees Trillions From Rich Flowing to Private Markets Bloomberg

• Equinox Expands to Become Manhattan’s Biggest Retail Tenant Real Deal

• US Productivity Rises At A Solid Pace Bloomberg

• New York’s Selective Return to Office Is a Problem Where Older Spaces Are Unloved Bloomberg

• Trump Wants to Close Favorite Tax Loophole for Hedge Fund Managers Yahoo Finance

• NYC’s Waldorf Astoria Closes On its First Sales After Renovation Bloomberg

• NYC’s Newest Transit Leaders Builds a Worker-Driven Strategy Bloomberg

• Bryant Park Grill To Close And Be Replaced By Jean-Georges Restaurant Gothamist

The Deep Insight

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