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A fair price doesn't always get the deal done in NYC real estate.
When a deal stalls or the competition quickens, it may be time to trot out the “deal sweeteners”–incentives that, depending on the situation, give a psychological and/or material assist to whomever is furthest from the closing table.
What's working in this market? BrickUnderground asked those in the trenches for their stories.
Deal sweeteners to woo a buyer:
- Seller financing: “I had a Murray Hill two-bedroom on the market for six weeks at $1.4 million. We had a couple of offers at $1.1 and $1.15. Then we announced that owner financing was available. We quickly sold for $1.3 million, with the seller financing 50 percent of the cost at 5 percent interest. He was just going to put the money in the bank anyway and he would only be making 1 to 2% interest, and here he’s getting 5% guaranteed. It’s a great opportunity for someone like that but not everyone can afford it especially if they need the cash to buy a new place.”—Richard Nymark, Bellmarc Realty
- Stuff: “Most of my sellers leave window treatments and many leave flatscreen tv's and chandeliers to get the deal done.” –Karin Posvar Picket, The Corcoran Group
- More stuff: “On one of our Upper West Side condo deals recently, the buyer was purchasing for his daughter who was returning from college and didn’t have any furniture, so our seller included all the furniture down to the dishes.” –Jeffrey Schleider, Miron Properties
- Rate buy-downs: “Some sellers are offering to buy down the buyer’s mortgage rate—you pay a fee and the buyer’s rate goes from 5.5% to 4.5%. It costs a couple thousand dollars to buy down a hundred basis points. It’s a nice way to incentivize buyers to move forward, and as a psychological draw it’s very popular with first time buyers.”—Jerry Feeney, real estate attorney
- Renovation allowances: “If it’s a wreck, sellers sometimes offer a renovation allowance, like $20,000 in an escrow fund to fund the buyer’s renovation. For a buyer, it can be better than getting $20,000 off the purchase price, because they would still have to put most of their cash into the deal. This gives them money to play with after closing.” –Jerry Feeney, real estate attorney
- Developer concessions: “In new construction, sponsors are typically paying their own lawyers’ fees, which are a couple of thousand dollars, and all or part of the transfer taxes—that’s about $20,000 on a $1 million apartment.” -- Jerry Feeney, real estate attorney
- Post-closing refunds: “Last week a sponsor in Brooklyn not only paid city and state transfer taxes and their attorney fees, but they allowed some very creative financing to make the deal work. Rather than pay the accepted offer price, the buyer would pay a higher price, and the sponsor would refund the additional amount at closing, basically allowing the buyer to finance the rest of his closing costs.”—Bill Milvaney, Bellmarc Realty
- Prepaid common charges: “In new construction in the Financial District, developers have been willing to split the transfer taxes in half with the buyers. They are also willing to change the contracts and riders, and give three months' common charges for free.”—Richard Nassimi, Barak Realty
Sweetening the pot for sellers:
- No financing: “All cash, all cash, all cash.” – Malcolm Carter, Charles Rutenberg Realty
- Lease backs: “My buyers offered a lease-back to the sellers that allowed them to stay in the apartment for four months after the closing. It was a three-bedroom, two bath on Riverside Drive asking $1.995 million and we got it for $1.725 with this stipulation.”—Stephanie Gurland, Bellmarc Realty
- Higher down payments: “The number one reason why deals are falling apart is financing. Besides waiving the mortgage contingency or offering a hybrid one, some buyers are decreasing the loan-to-value ratio—like from 80% to 75% financing--to make the seller a lot more comfortable with the buyer’s ability to get financing.” – Jerry Feeney, real estate attorney
- Split broker's fees: “Every once in awhile, buyers offer to pay part of the broker’s commission. It reduces the purchase price which for the seller reduces capital gains taxes, transfer taxes and might even push the sale underneath the threshold for the mansion tax.” – Jerry Feeney, real estate attorney