There Is No Secret Formula For Pricing Real Estate in NYC
While online tools have empowered consumers with more information and data, it’s important to remember that when determining price, there is no black and white formula.
Buyers today have more and more tools at their disposal, and in many ways that’s made the real estate market more transparent than ever.
If you’re interested in an apartment, you can log onto StreetEasy or Zillow and in just a few minutes find out everything from how much the unit sold for in the past, to what else is available in the building, and what the average per-square-foot selling price in the neighborhood is right now.
In my opinion, that’s a great thing, but there is one downside: It leaves may people with the impression that the price of any apartment is cut and dry; that it can be easily calculated with a few key indicators. But brokers know that’s just not true—and especially not in New York.
Outside tools like StreetEasy and public real estate databases have made consumers extremely conscious of things like price per square foot, and the sharp uptick in new development here has only added to the perception that price per square foot is king. (New developments are actually sold almost completely on a per-square-foot basis.) But for both buyers and sellers, there are usually an array of influences to consider when making a deal, and not everything is just about the max per-square-foot market value.
For example, I recently worked with a seller who was inclined to accept less money than the highest bid because they liked the profile of a particular buyer. They felt it was the right move, and were just confident that the deal would go through. The seller probably could have gotten a little more money if they held out for longer, but because they were comfortable with all the particulars, they just felt it was right. That’s why brokers always stress the importance of putting together a solid package, because sellers consider more than just who bids the highest dollar figure—they consider all the particulars.
Sellers consider more than just who bids the highest dollar figure — they consider all the particulars.
This is particularly true in co-ops, where property is allocated in shares and not in square footage, so you may not have a tangible number to work with. Sellers will also consider the buyer’s financial strength and whether they are likely to receive board approval.
In other situations, when a seller is moving to another city or being relocated for work, the sense of urgency for them translates into needing a quick deal. For those sellers, getting a few thousands dollars more isn’t going to be worth waiting an extra month or two for the deal to close, so they may be inclined to go with an all-cash offer that’s slightly lower.
Every deal involves both a buyer and seller who have a complex mix of financial, emotional, and logistic considerations. The value of the apartment is not a black and white formula.
Those are just two examples, but the bottom line is this: Every deal involves both a buyer and seller who have a complex mix of financial, emotional, and logistic considerations. The value of the apartment is not a black and white formula. That means that the final deal is not going to be dictated by an online calculator that considers only the price per square foot. And even when you are dealing with new construction, the square footage there is going to be measured by the developer, so you can’t be sure it’s exactly right.
Real estate is not a simple commodities index where the value is set and clear to all. Every apartment has its own unique story, and every buyer and seller comes to the table with a different set of wants and needs. In turn, that means a broker’s job isn’t just to get their seller the highest dollar amount possible (that’s part of it) but also to get the best possible terms, bearing all circumstances in mind.
What does this mean for buyers? If you’re very interested in an apartment, have a conversation with the listing agent. Find out what the seller’s situation is. Are they a family that has already moved out and purchased a new home, so will likely want to sell quickly? Or an investor who only cares about the highest possible return? Finding out more about the seller will give you insight into what’s most important in a bid.
Real estate is a complicated business, and as anyone who has bought or sold an apartment will tell you, there are so many factors that come into play. Online tools have revolutionized the business, but it’s important to remember that when determining the value of any property, there’s no simple formula.