Special offer

Bidding War | May the Best Buyer Win

By
Real Estate Agent
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 buyer's qualification and terms as the price.
 
So how do you win a bidding war for a Manhattan or Brooklyn 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. In other words if the bank has already approved building and you're confident of your own credit and financial qualifications you can waive financing contingency. 
  •  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 New York City market.
 
 
 
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©Mitchell Hall 2022

All content/images, unless noted, are the property of Mitchell Hall & may not be used without permission. 

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          Call Mitchell Hall @ 917-312-0924
          Email: mh@MitchellHall.com

Comments (20)

Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

Wow Mitchell.  This is like the "How to buy real estate in NYC" bible.

Oct 20, 2015 11:13 PM
Mitchell J Hall
Manhattan, NY
Lic Associate RE Broker - Manhattan & Brooklyn

Thanks Lenn,

It's been rough out there this Summer and Fall for buyers.  

Oct 20, 2015 11:16 PM
Tony and Suzanne Marriott, Associate Brokers
Serving the Greater Phoenix and Scottsdale Metropolitan Area - Scottsdale, AZ
Haven Express @ Keller Williams Arizona Realty

Mitchell J Hall Here in Arizona we would consider using a clause that automatically outbids other offers up to a maximum amount.

Oct 20, 2015 11:19 PM
Ralph Gorgoglione
Metro Life Homes - Palm Springs, CA
California and Hawaii Real Estate (310) 497-9407

Great blog.  I find it useful to ask about the seller's life logistics / moving logistics also.  That dialogue may provide some insight for any unusual terms that you can weave into the contract that may be beneficial to the seller.

Oct 20, 2015 11:22 PM
Mitchell J Hall
Manhattan, NY
Lic Associate RE Broker - Manhattan & Brooklyn

Hi Tony and Suzanne, I have heard of that. It's never been used here to my knowledge. I may have to try it. It's so frustrating for buyers in this market.

Hi Ralph, Great idea, anything a buyer can offer seller that seller needs besides money can be really important.

 

Oct 20, 2015 11:31 PM
Richie Alan Naggar
people first...then business Ran Right Realty - Riverside, CA
agent & author

I have to side with Lenn Harley and ask that we all bow our heads when Mitchell J Hall shares his Real Estate savvy

Oct 20, 2015 11:55 PM
Gloria Laughton Allston
COLDWELL BANKER RESIDENTIAL BROKERAGE - Princeton, NJ
Realtor(NJ)/Broker(NY)

Very clear and sensible advice-thanks.

Oct 21, 2015 12:06 AM
Nicole Doty - Gilbert Real Estate Expert
Zion Realty - Gilbert, AZ
Broker/Owner of Zion Realty ZionRealtyAZ.com

Great article Mitchell. I'm so glad we haven't dealt with a lot of bidding wars here in my market since about 2012. 

Oct 21, 2015 12:57 AM
Roger D. Mucci
Shaken...with a Twist 216.633.2092 - Euclid, OH
Lets shake things up at your home today!

Wow, amazing post Mitchell.....such wonderful advice for buyers in such a competative market.

Oct 21, 2015 01:05 AM
Patricia Kennedy
RLAH@Properties - Washington, DC
Home in the Capital

Mitch, from what I've heard about NYC coop boards, waiving board approval could be risky.  What if they don't like your dog?

Oct 21, 2015 01:08 AM
Mitchell J Hall
Manhattan, NY
Lic Associate RE Broker - Manhattan & Brooklyn

Thanks Richie.

Gloria, Thank you. 

Nicole, Bidding wars are not fun and very stressful. Of course they're much better as the seller's broker than buyer's but even then you have to deal with all the unhappy buyers and buyer's agents and even some accuasations. I'm having "highest and Best offers due Friday on a new listing that came on the Sunday.

Roger, Thanks as always. The past few weeks I've had buyer that lost 4 bidding wars and bid way over ask. One of them had 20 other offers.

 

Pat, You can't waive board approval. The coop gets to approve or reject. Wouldn't that be nice.  I guess I wasn't clear. I meant waive financing contingency on contract based on your own pre- approval  (strong income/assets) rather than contingent on the building being approved by lender. I just took a new listing. The seller had two board turn downs under previous broker. I have learned how scrutinize buyer's financials and spot the red flags. 

Oct 21, 2015 01:57 AM
Stefan Winter
Real Estate in IL & NV | Owner of Real Estate Web Tech | Daily Vlogger - Las Vegas, NV
Owner - Winter Group & Real Estate Web Tech

Great advice, if only every buyer would listen when we give great advice like this. Thanks for sharing & have a great week.

Oct 21, 2015 03:44 AM
Janis Borgueta
Newburgh, NY
Retired RE Salesperson

Amazing! Great news, and bad news all at once. When your buyers are priced out of the market send them north where they will be able to afford to commute!! 

Oct 21, 2015 06:57 AM
Vera Gonzalez
RE/MAX Suburban, Inc. - Sterling Heights, MI
Gonzo For Real Estate

Great blog Mitchell J Hall . The bidding war... great advice to get you away from that ugh feeling.

Oct 21, 2015 09:42 AM
Chuck Willman
Chuck Willman - Alpine, UT
NewHouseUtah.com

In instances such as these I would think it could be suitable to have an online auction provision in which potential buyers could register and have an open viewing period a few days before the auction. The seller achieves a price based on demand (and could set a minimum reserve) and the buyers would have a chance better than a single offer. Are such auctions held or is there some impediment to such a thing?

Oct 21, 2015 06:17 PM
Praful Thakkar
LAER Realty Partners - Andover, MA
Andover, MA: Andover Luxury Homes For Sale

Mitchell J Hall working with an efficient real estate professional can help the buyers write clean offer - and if it is all cash, why not?

The contingencies can be minimum for sellers to love that buyer.

Very good tips for buyers.

Oct 22, 2015 04:13 PM
Nina Hollander, Broker
Coldwell Banker Realty - Charlotte, NC
Your Greater Charlotte Realtor

We are having some of the same issues in Charlotte--sellers aren't listing because there's nothing for them to buy and it's getting more expensive. Having sold coops in NYC back in the early and mid-90's I am very much aware of all the steps buyers need to take to ensure a positive outcome in a multiple offer situation.

Oct 23, 2015 05:58 AM
Dr. Paula McDonald
Beam & Branch Realty - Granbury, TX
Granbury, TX 936-203-0279

Well done on this topic.  Strategy for sure is the key in these instances.

Oct 23, 2015 08:12 AM
Mark Piscitelli & Theresa Ziebro
Remax Trinity - Brecksville, OH

Wow, reading this makes me so happy to be in my small pond!  Good luck to your poor buyer who got outbid four times (and to his poor Realtor, too!)  

Oct 23, 2015 12:06 PM
Anne-Laure Touchard
Charles Rutenberg, LLC - Manhattan, NY
Agent immobilier à New York - USA

Great advice for buyers in the New York City real estate market!

Oct 26, 2015 01:19 AM