How to Get the House When You Really Want the House

by Mark Pruner

I wrote an article a couple of years ago about combat buying or how to be the prevailing buyer in a hot market. The article came down to basically, do your homework, be prepared and move quickly. This works well when the house that you want has just come on the market, but what do you do when you are not the first one to find the house.

First you need a good Realtor. There is probably no better time to have a good Realtor than when you are in a competitive bidding situation. So let’s take a look at what you can do at each step of the offering and contract process.

  1. Interest expressed – If your Realtor tells you that other parties have expressed interest in the property it usually means that other buyers have been back two or three times and/or are asking serious questions about the property such as when was the roof last replaced or how many bedrooms is the septic system approved for.

The solution when you hear that someone else is exploring an offer is to make an offer first, and make it a good one.

Obviously, a high price is going to be attractive to a buyer, but don’t only focus on price also match the seller’s needs. Do they want a quick close or a delayed closing, is a lower all cash price better than a higher price with a mortgage contingency and so on? The highest priced offer doesn’t always get the deal.

You want to make it a high offer so that the other interested parties may decide to not even bid. You may pay a little higher than the other side was willing to go, but you may also save yourself from getting in a bidder war with two, three, or even more buyers. In a bidding war many people show their competitive nature and will offer more than they had originally intended just to “win” the bidding war. It can be a Pyrrhic victory.

  1. Offer made – If another buyer has already made an offer you need to move quickly and make your own offer. You need to alert your house inspector that you may need them to do a house inspection on short notice and your attorney that they may need to turn around a contract quickly.
  • Offer accepted – If an offer has already been accepted, you are not out of the game. The rule in Greenwich is that there is no deal until the contract is signed. So if it is the perfect house go ahead and make an offer. Submit your highest and best offer and if possible without a mortgage contingency. Even if you are going to get a mortgage you don’t necessarily have to have a mortgage contingency. You just have to be sure that you can close if the bank financing falls through. In an absolute worst case scenario can you get financing from a rich uncle or is there a co-signer with good credit ready to step up.
  1. Inspection completed – If the offer has been accepted and the other buyer has completed their inspection, your offer needs to be much better than the accepted offer. At this point the seller is mentally well down the road to selling the property to the other buyer so your offer has to look significantly better than the offer they have already accepted. Your offer needs to meet all the seller’s requirements. For example, an all cash, quick close offer with no inspection and a significant price premium might do the trick.

Going without a house inspection is not a good idea, unless you are planning on tearing the house down or doing a gut renovation. Also if the other buyer is moving to change the deal terms after the inspection that’s a red flag there may be a problem.

The buyer who wants to renegotiate after the inspection may, however, be a buyer that takes every opportunity to whittle down the price. Never under-estimate the fury of a seller that thinks they have been deceived. I’ve seen sellers take less money just to spite the “jerk” who was trying put one over on the them. If you are the first offeror don’t be that jerk. If you are the second offeror be ready to move quickly if the other buyer turns out to be a jerk.

  1. Contingent contract signed – Once a contract is signed with a mortgage contingency control of the deal shifts from the seller to the buyer. The buyer now has the ability to call off the deal if there is a problem with the financing. The seller is bound if the buyer wants to go through with the deal. Even if you are late to the game you may have an opening if the other buyer has a financing problem.

The new TRID rules are making things more complicated and appear to be delaying closings. Buyers, particularly in competitive bid situations may not be requesting enough time to actually get a mortgage approval. If the other buyer has to ask for an extension, the seller has the option to turn them down and accept your offer. You need to let the other agent know that your offer is a continuing one.

  1. Fully executed contract – You would think when the contract is fully executed, also known as binding or as our MLS calls it pending that you are out of luck, and you probably are, but people are people. If you really absolutely have to have that one particular property and price is no object you could consider paying the buyer to terminate the contract. This wasn’t even common pre-recession, but now that nearly every buyer is a value buyer it rarely happens, but any contract can be terminated if all parties agree.

Before you start looking at ways around a contract whether a contingent or pending contract talk to your attorney. You don’t want to get involved with a tortious interference with contract claim or some other lawsuit. There are ways you can do this and ways that will almost certainly guarantee trouble.

Your best option as always is to get to the house before anyone else has expressed an interest and make a good offer first and be prepared to sign the contract quickly. If someone else got there first show the seller that you are the better prospect and move quickly so that a third buyer doesn’t beat out both of you. Good luck!

 

Interim April Market report

Buyers are signing contracts like crazy and making offers. I’m negotiating on three deals now. Despite this market activity, April looks like it is going to be another poor month just as March was. Part of this may be that some sales got moved into our record sales in February of this year and part of may be that closing are just taking longer as the finance rules have gotten more complicated. Regardless, it is a strange market.

We have a 133 contracts up 40 contracts in only 3 weeks. At the same time inventory has gone up dramatically to 634 single family homes from 577 homes at the beginning of the month. Despite all this activity we have only closed 19 sales so far this month. Last year we had 54 sales in April. April could still out much better as at least 74 contracts have been hanging around since the end of the last coast.

We have lots of new inventory including a house that I just put on at 505 E. Putnam. It is a short walk to the high school. We also have lots of open houses so it’s a good time to be looking.

Current 1st Q Difference
April Sales Contracts Contracts Contracts
<$1M 4 21 14 7
$1 – 2M 6 48 30 18
$2 – 4M 8 46 36 10
>$4M 1 18 13 5
Total 19 133 93 40
1st Q 4/24/2016
1st Q Sales Inventory Inventory Inv. Diff
98 577 634 57

 

The High-End Greenwich Real Estate Market by Volume

By Mark Pruner

Douglas Elliman – Greenwich

mark.pruner@elliman.com – 203-969-7900

We have $2.7 billion of house listings on the market and 60% of that $2.7 billion, or $1.6 billion of listings are on for over $5 million. This is more remarkable when you consider that the 169 listings over $5 million represent only 29% of all listings.  When you look at houses solde the story is even more dramatic with the number of sales over $5 million representing 32% of sales volume, but only 8% of the 122 sales we’ve had so far.

Most of the stats you see for the market are based on number of houses sold not the value of those houses. Whether $500,000 or $15,000,000 it still counts as only one sale. When you look at the total value of the listings and sales, the Greenwich market looks very different. At the end of the first quarter we had we had 577 single family home listings and had accumulated 122 home sales in the first quarter. Our listing counts peak between $2 and 3 millions and the number of first quarter sales peaks between $1 and 1.5 million.

graph-1

Greenwich Listings and Sales by Volume

If instead of looking at the number of listings and sales you look at the value of the listings and sales, i.e. the sales volume, you can see how the listings over $5 million, and particularly over $10 million have so much of the listing value in Greenwich. In the spring market we always have more listings than sales, but when you look at listings and sales by value the sales almost disappear. Our highest volume price range is as you may expect the over $10 million price range where we have $788 million of listings while our highest sales volume is between $3 and 4 million where we have a total of $37 million of sales.

graph-2

When you focus in on the volume of just sales and contracts a different story shows up. As mentioned, sales volume year-to-date peaks between $3 and 4 million dollars. While March was a poor month for sales, it was a good month for contracts signings. For price ranges all the way from $2 million to over $10 million the sales volume of signed contracts exceed the sales volume for the first three months of the year. The one exception is the $6.5 – $10 million range where we only need a couple of contracts to turn around this segment also.

graph-3

Spreadsheet of Inventory, Contracts and Sales Volume by Price Range

As of 4/2/16 Inventory Contracts Last Mo. Solds Tot. Solds+ Contracts  YTD Solds  YTD+ Contracts
< $600K  $ 1,504,000  $ 1,149,000  $                   –  $ 1,149,000  $ 1,882,900  $ 3,031,900
$600-$800K  $ 10,813,999  $ 4,107,000  $   1,395,000  $ 5,502,000  $ 7,386,500  $ 11,493,500
$800K-$1M  $ 18,148,500  $ 5,584,000  $   2,710,000  $ 8,294,000  $ 9,903,000  $ 15,487,000
$1-$1.5M  $ 67,473,500  $ 17,111,000  $   8,455,000  $ 25,566,000  $ 22,630,006  $ 39,741,006
$1.5-$2M  $ 133,279,500  $ 28,433,000  $ 10,737,500  $ 39,170,500  $ 30,217,500  $ 58,650,500
$2-$3M  $ 252,348,990  $ 59,822,000  $   6,755,000  $ 66,577,000  $ 29,435,500  $ 89,257,500
$3-$4M  $ 338,380,999  $ 42,585,000  $ 13,418,100  $ 56,003,100  $ 37,728,100  $ 80,313,100
$4-$5M  $ 237,453,995  $ 22,587,375  $   8,791,500  $ 31,378,875  $ 17,691,500  $ 40,278,875
$5-6.5M  $ 396,838,000  $ 28,430,000  $                   –  $ 28,430,000  $ 21,840,000  $ 50,270,000
$6.5-$10M  $ 428,547,000  $ 7,100,000  $   8,838,000  $ 15,938,000  $ 24,788,000  $ 31,888,000
> $10M  $ 788,118,000  $ 26,475,000  $ 14,000,000  $ 40,475,000  $ 24,750,000  $ 51,225,000
             
TOTAL  $ 2,672,906,483  $ 243,383,375  $ 75,100,100  $ 318,483,475  $ 228,253,006  $ 471,636,381

At the end of the first quarter we have $243 million in contract value in 93 contracts; 41 of those contracts are non-contingent all of which should close. We have 52 contingent contracts and usually about 90% of those contracts will close. Sometimes they need a second attempt at bank financing. With the federal government’s new TRID regulations this percentage may drop a little as the Consumer Financial Protection Bureau complicates finance and closings to “protect” the consumer.

2016 Sales over $5M in Greenwich

graph-4Figure 1 – 2015 Solds and Contracts over $5 Million

So far we have had 23 sales and contracts over $5 in Greenwich.  The transactions are spread pretty evenly between three areas in town Belle Haven/Meads Point, mid-country and backcountry.

Listings over $5M in Greenwich

graph-5Figure 2- Active $1 – 2 million -April 2016

We have 170 listings over $5 million in Greenwich that are spread throughout the town. The waterfront and backcountry have many of the listings, but mid-country in the 2-acre zone and even the 1-acre zone have very good representations.

 

2016 Sales and Listings Volume over $5M by Percentage

When you look at the pie charts for inventory and sales the disproportionate value above $5 million is clear with 60% of the market value. The solds over $5 million represent only about half that percentage or about 30%.

graph-7 graph-8

Summary

  The over $5 million market is a very important part of the market for Greenwich. We have beautiful houses on gorgeous lots in this price range and it certainly gets the most attention from the national media.

We have a lot of good options in this price range, but as we have seen for the last couple of years, sales in this price range have been slow and mostly occurring in the third and fourth quarters.

We do have some good news here and there. For the backcountry in particular we are hearing of some return of the weekend buyer primarily from New York City. Last year we saw good sales in the $5 – 6.5 million range and we have had nice sales at the very high-end this year. We have some promising developments, but no clear signs of an upturn.

1st Quarter and March 2016 Greenwich Real Estate Report

By Mark Pruner

Douglas Elliman – Greenwich

mark.pruner@elliman.com – 203-969-7900

 March 2016 was not a good month for single family home sales in Greenwich, but the first quarter was a good first quarter. We only had 29 sales reported by the GMLS in March 2016 compared with 49 sales in February of this year. Now the 49 sales last month was a record for February, while the 29 sales was the lowest since March 2009 back in the heart of the Great Recession.

As of 4/2/16 Inventory Contracts Last Mo. Solds Tot. Solds+ Contracts  YTD Solds  YTD+ Contracts Mos Supply Mos w/ Contracts Last Mo. Annlzd
< $600K 3 2 0 2 4 6 2.3 2.3
$600-$800K 15 6 2 8 11 17 4.1 4.0 7.5
$800K-$1M 20 6 3 9 11 17 5.5 5.3 6.7
$1-$1.5M 53 14 7 21 19 33 8.4 7.2 7.6
$1.5-$2M 74 16 6 22 17 33 13.1 10.1 12.3
$2-$3M 97 24 3 27 12 36 24.3 12.1 32.3
$3-$4M 94 12 4 16 11 23 25.6 18.4 23.5
$4-$5M 52 5 2 7 4 9 39.0 26.0 26.0
$5-6.5M 69 5 0 5 4 9 51.8 34.5
$6.5-$10M 54 1 1 2 3 4 54.0 60.8 54.0
> $10M 46 2 1 3 2 4 69.0 51.8 46.0
TOTAL 577 93 29 122 98 191 17.7 13.6 19.9

First Quarter – If you combine a great February with a poor March and throw in a so-so January you end up with 110 sales for the first quarter compared to 107 sales in 2015 and 109 sales in 2014, so what we continue to have a market that whipsaws back and forth month to month, but by the end of the quarter averages out to the new normal.

graph-1

Contracts – While our sales have bounced around there is good news when you look at contracts outstanding. We have 93 contracts; 52 contingent contracts waiting for mortgage approval and 41 binding contracts.

Upper Half of the Market – The further good news is that 25 of those contracts are for over $3 million and the over $3 million dollar market had 8 of the 29 sales in March. Our high-end market is showing some life with 10 sales and contracts over $5 million, but this is out of an inventory of 169 listings that are over $5 million. Except for those 10 homeowners and their agents it’s not quite time to break out the champagne yet.

graph 2.gif

Our inventory, as it always does, expanded nicely in March, so that we now have 577 single family homes on the market and we usually peak around 600 listings in April or May. The big increases were in the upper end as high end properties that were taken off the market for the winter, and some new inventory, came back on the market.

graph 3.gif

The months of supply numbers are always deceptive in March as sales are slow, while inventory expansion is rapid. The result is a big jump in months of supply over $1 million. You can get a better sense of the market by looking at the months of supply based on sales and contracts. From $5 – 6.5 million we have 52 months of supply based just on sales, but when you add in contracts the months of supply for this price range drops to 34 months of supply or a difference of 1.5 years of supply by simply including the contracts. Now not every contract will actually close, but it’s a better estimate of what’s going on in the market.

What’s Trending – When you look at the pie charts of inventory, sales and contracts a couple of things jump out. First, March was a really good month for contracts from $2 – 3 million.

Secondly, our sales under $1 million are very supplied constrained and are likely to be getting worse. If you compare the size of the inventory pie slices under $1 million to the slices in year-to-date sales you can see how quickly this segment sells as we have already sold many of the houses that came on this year under $1 million. If you look at the YTD sales compared to contracts this market may actually see sales drop despite robust demand as we are not getting replacement inventory coming on the market under $1 millon.