Posted by Leonard Steinberg on March 7, 2011
While not every listing is producing multiple bids, the volume of multiple bids on good properties is back in a BIG way in New York City real estate, both in the residential and commercial sectors. (It has also returned to the art world and many other markets) While these multiple bids do not necessarily produce bids over the asking prices, the fact that there are multiple bidders is causing many properties to reduce their level of negotiability…..often to zero. AND, this is happening only on correctly priced, highly desirable properties. But it is happening across the board and we suspect the results of the first quarter of 2011 will indicate price escalation and a jump in volume.
We see it first had in the residential market, but we hear of the same thing in the commercial market, where very large leases are being signed, often as a result of multiple bidders. Business is definitely growing in Manhattan. Unemployment is shrinking, more so than was originally estimated.
What does this mean? Most importantly, it means there are more buyers than there are sellers of the best properties, hence an inventory shortage in certain segments. This may take 18 months to cure: While new development planning has roared back to life, actual product that can be moved into is not going to help the current situation. With businesses growing and hiring, the demand for property will continue to grow, possibly out-pacing supply. Big cities continue to become more and more desirable to a wider audience than ever before…..including retirees, young families, and foreign buyers.
How to win a bidding war? Know your facts and figures well. Too many buyers are focused on closed sales from the past 12 months, blinding themselves to the fact that the market has recovered since then. A listing that closed in September 2010, probably is a reflection of the market in June 2010. That information may be out-dated. Try to tap into what is selling for what right now…..the kind of information no website is delivering. And more importantly, focus on the alternatives: if the competition for this specific property is in very limited supply, be certain it may be correctly, or under-priced.
New York real estate buyers definitely have herd mentality, so do not be fooled into thinking that just because a property has multiple bids it is the best one…..then again, its nice to know more than one person likes what you like.