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Low Inventory = Bidding Wars | The Best Buyer Wins

Average co-op sales prices rose year-over- year, to more than $1.35 million in August, but inventory continued to dwindle — it was the 44th consecutive month of declines, according to a report from Corcoran Group.  
Fewer co-ops are put to market, and many owners are not so eager to sell, despite the increase in prices. “The reason most people sell is they want to upgrade,” said Mitchell Hall, a broker at Corcoran Group. With condominium prices also reaching new highs, “upgrades are possibly out of reach,” he was quoted in The October Real Deal.

What does that mean to both buyers and sellers? It means for every apartment priced properly that comes on the market there are going to be several buyers bidding on it. There are 8.5 million people in NYC. There is a lack of housing. It means bidding wars since only one buyer can purchase the apartment. A coop seller needs to be as concerned about a buyers qualification and terms as the price.

So how do you win a bidding war for a Manhattan coop? A buyer must provide as much information as possible. It's not always the highest price but the highest and or best qualified buyer and best terms.  It's easy for a seller to enter into a contract with a buyer but it's not so easy to make it to the closing table the buyer must be approved by the coop board. 

How to Win a NYC Bidding War?

Bid Quickly:


Show your qualifications with offer. Swift and aggressive action is called for.
  • Include recent tax returns with W2's
  • Pre-approval letter from lender
  • Financial statement
  • Credit report
  • Personal letter
  • Show before and after closing liquidity
Highest & Best:

Price is usually most important to a seller but terms can make a big difference and can seal the deal. 


  • Don’t start offers lower than the asking price.  
  • Bid over ask if there are other bidders.
  • Offer a larger down payment than required.
  • Set closing at the seller’s convenience.
  • Know what the seller wants/needs beyond the cash (tie-breakers)
  • Avoid a bidding war by offering near what you think the winning bid in a war would be.
  • Offer to pay flip tax.
  • Offer a leaseback to the seller
  • Put more money down at the contract signing
  • Waive due diligence in order to sign the contract next day
All-cash deals

Almost always, the offer that doesn’t rely on a purchaser getting a mortgage is the safer and faster option. A lender can kill a deal, the apartment may not appraise, more cash may be required, the coop may think the buyer is less financially qualified.

Debt to Income Ratio

Co-op boards generally want a 25 to 30 percent ratio, meaning  that no more than this much of a buyer's monthly gross income goes toward paying off debts. Many  including income restricted coops will limit the debt to housing costs (mortgage + maintenance) Owning another property with a mortgage is considered debt, rental income collected would count toward income.


How to Modify a Mortgage Contingency to be Competitive in the Current Market  

Three key factors comprise the mortgage contingency, and you need to look at where you can compromise:

1. Appraisal:
  •  Put down 25% + or put in the contract that if the apartment appraises low, the buyer will make up the difference in cash.  For the buyer’s peace of mind, put a cap of 5% to 10% on it- the appraisal is not going to come in that low and it will keep you from feeling that you are taking on too much risk.  
When a bank agrees to lend 80% (or 90%) loan-to-value, they are indicating their willingness to finance up to 80% of the purchase price.  If the appraised value happens to come in at $500,000 instead of the contracted  purchase price of $600,000, the lender will ultimately finance 80% of the lower of the two—in this case the appraised value of $500,000.  Unfortunately, this means the buyer may have to scramble to find more cash to put down.

2. Building Approval:

Today not only does the borrower need to be approved the coop and/or condo project does too. 
  • Get a mortgage broker working to qualify the building right away, and if the building is not Fannie Mae compliant, the mortgage broker can make sure there are other financing options available, and can check which financial institutions that have lent in the building in the past 3-6 months.
  • Put in the contract that if the buyer’s chosen financing option is declined, they need to apply for financing through the bank or mortgage broker of the seller’s choosing before they are released from the contract via the contingency.  
 3. Buyer Approval: 

If you're a well-qualified buyer you can opt to waive your own approval contingency as long as the building is approved.
  •  Understand interest rates and loan to value (LTV) monthly payment costs and amortization.
  •  Work with a local loan officer or broker familiar with NYC coops and condos 

More Tips:
  • Be prepared. Hire an attorney before making offer. Have your team in place. An accepted offer is not binding. Seller has no obligation to buyer until a contract is fully executed.
  • Bid an odd number. If the apartment is listed at $875,000 and you're willing to pay $900,000, bid $901,000 or $900,198 the extra thousand or $198 may be a tie breaker.
Contact me to buy or sell in today's competitive Manhattan market.




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