Hat tip to the Coronado Kid for sending this 2010 summary from The Apple, Peeled:
BUYERS – Top 7 Lessons of 2010:
1. Bears will always be bears: Many bearish voices in 2009 were calling for the NY Real Estate market to fall off a cliff … at the very least for prices to drop another 20%. In 2010, feverish discussions continued on StreetEasy and Urban Digs, making the case that the downturn seen to date was only the beginning. And yet few could argue that things have not at least stabilized, if not improved, as compared to 2009 – some may even call it having formed a bottom.
2. Deep discounts are so 2009: No longer could buyers negotiate 10-15% off asking prices. Buyers felt a sense of disbelief in having to often pay full ask, sometimes even engaging in bidding wars in what they thought was a buyer’s market. This was the result of too many would-be-buyers chasing too few properties. Good inventory was hard to find in 2010.
3. A deal is not a deal until a signed contract’s in place: Although a very questionable strategy, to be sure, this year was the year of multiple contracts being sent out by sellers to hedge their bets after hearing of so many deals that fell apart due to financing issues.
4. Parallel offers help avoid attachment: Frustration rose for many buyers who had accepted offers on the table, only to then find out the seller reneged and sold the apartment to someone else. In turn, buyers began negotiating in parallel to avoid putting all of their eggs in one basket.
5. New developments come with their own headaches: It used to be that buying new meant buying better quality than an older building would offer, saving you money by not having to fix the apartment’s infrastructure or renovate its looks. Yet many new buildings drew a flurry of lawsuits due to shoddy construction and cut corners. It paid to do your own due diligence about the developer and the building’s reputation.
6. Easy money is dead: Getting qualified for a loan became the biggest obstacle to getting a deal done in 2010. Buyers had to have great credit, great debt-to-income ratios and click their heels three times while repeating “there’s no place like home” to get a mortgage. (Even then, signing a contract without a mortgage contingency was akin so Russian Roulette.) If they looked to get a Jumbo mortgage, then they had to throw in a sacrifice to the mortgage gods to make the mortgage go through.
7. Technology rules (to a point): So many buyers leveraged the internet and its real estate advances this year. They became expert at finding the right properties, researching them, comparing them, and using the information at their fingertips to fuel their negotiation strategies. The frustration kicked in when sellers budged no more and buyers realized that real estate is not such an efficient market, neither on the buy nor sell side of the equation.
SELLERS – Top 7 Lessons of 2010
1. New York is not Miami: We’ve all heard it so many times, perhaps it’s even escaped your own lips at some point: “But New York is different!”. The country underwent the most significant downturn in our generation, middle-America is suffering, housing prices are down north of 50% in some areas of the country and unemployment hovers around the double digit barrier … and the worst that the NY Real Estate market could do was down 20-25% on average from its 2006 peak? Yes, the higher the pricepoint, the more significant the down-turn, but … one must admit, it’s still damn impressive!
2. Renovations sell, fixer uppers don’t: 2010 was the year of the first-time home buyer and of the turn-key purchaser. This means that newly renovated properties sold faster than ever before, particularly now that buyers no longer had access to home equity lines of credit to use towards fixing an older property. Those who chose to buy wanted to a prêt-a-vivre home, ready to live in from the start.
3. Proper pricing is so now: Sellers who tried to “test the market”, hoping for that one special buyer who would happen to give them their high asking price saw themselves on the market for a loooooong time. Then the enemy became time on market, with buyers neglecting price-improved properties out of the skepticism that comes along considering a stale listing.
4. Renting is a real option: With the rental market making a real comeback this year, many sellers on the fence of parting with their properties found it lucrative to rent. Inventory was slim and having a tenant in place for 1-2 years to ride out the storm paid off.
5. Cash is still king: With the turbulence felt in the credit markets, sellers had to contend with the very real tradeoff between accepting an ok all-cash offer and a higher, mortgage contingent one. Many chose cash, over bearing the risk of the deal falling through after months of buyers slugging it out with their bank.
6. Appraisals matter: Just because you were lucky enough to get the price you wanted for your apartment, it didn’t mean the negotiations were done. Appraisals became the Achilles’ heel of the industry as they seemed to consistently come in below the contract-signed price, throwing a wrench in the whole process. Appraisals became commoditized and many began criticizing the process, now driven by volume versus quality and experience.
7. Your building has its own credit rating: Many sellers felt stranded by the inability of their buildings to get approved for financing, an issue that often popped up at the tail end of the entire process. After going through the motions of putting the property up for sale, negotiating the price, and moving towards a close, many owners in land-lease buildings, or those with too great a concentration of rental units or owners found themselves having to rationalize staying in their home.