Real Estate Sales in Manhattan : Overprice and You’ll Regret It

If you own real estate in Manhattan and are thinking of selling, like most people, you want a return on your investment. Logically, you want to get the best price you can for your luxury condo or cozy brownstone. But sellers in New York beware: holding out for a higher price can cost you a lot more than time waiting for that one willing buyer.

In today's market, a stubborn seller can find him/herself stuck in a catch-22, where overpriced properties get rejected at the bank level because they appraise for less than the purchase price. Why should the appraisal matter, you ask, if someone is willing to pay more? There are several reasons.

First, let's face it: buying real estate in Manhattan is an emotional business. Who wouldn't get swept off their feet upon seeing that trendy Chelsea co-op with the breathtaking view? But a buyer who agrees to pay top dollar in the heat of the moment might find reality quite sobering when, 3 weeks later, they're looking at a low appraisal. Most buyers at this point will attempt to re-negotiate the sale price. If by chance there is a buyer still willing to go forward with the higher price, unless he/she can come up with cash to offset the loan to value ratio, the deal will die right there anyway.

As a result of the above scenario and of today’s changing real estate market, more and more real estate deals in Manhattan are being made contingent upon financing. This means that if the property in question does not appraise for the agreed purchase price, the buyer is free to take their deposit and walk away from the deal. The process is grueling for sellers who find themselves tied up for months in a deal with no financial protection, which, when it falls through, leaves them back at square one.

So what is an eager seller in Manhattan to do? The answer is simple: be reasonable. You don’t have to under-price your SoHo studio in order to sell it - just don’t expect to get $50K more than the three other studios that sold last month. Listen to your realtor - he/she knows the local market like the back of their hand. A reasonably priced listing should be within 10% of the market value. Asking higher than that “just to see what happens” is dangerous, as overpriced listings historically end up selling for less than market value. Yes, it's nice to imagine double digit returns on your property, but the reality is, it’s highly unlikely. And pricing your property to fit the market means your deal will close quickly, freeing you to move on to greener pastures—or, in the case of Manhattan Real Estate - larger balconies!