Stephen G. Kliegerman
President of Development Marketing
Park Avenue Office
By Elizabeth Harris
THE key to selling an apartment is hitting the right price, especially in a tough market. But when they’ve cut the price as low as they can, certain sellers throw in a little something extra, maybe a flat-screen television or cash toward loan fees, in the hopes of attracting buyers.
Developers have been going this route for months, and individual owners are following suit.
Christie and Kevin Hartbarger, who put their Brooklyn apartment on the market in June, are offering to pay down a point or two on a buyer’s mortgage — an upfront fee that purchases a lower interest rate.
According to Jan B. Geller, a lawyer at Geballe & Geller, if a seller spends $10,000 buying down a purchaser’s $500,000 mortgage, that can save the borrower some $37,000 in interest payments over the life of a 30-year loan. That’s a better deal for everyone than just knocking down the price.
Elizabeth Sheehan, a sales associate at Brown Harris Stevens and the Hartbargers’ broker, says she has been advising sellers to consider offering this incentive. “When there are 15 other properties on the market at our price point, this shows that we’re much more adaptable and flexible.”
Ms. Hartbarger and her husband are asking $475,000 for their two-bedroom co-op at 904 Union Street in Park Slope. She hopes that buying down points will get her family to a deal more quickly. “In a bad economy, people look to get more creative in their approach to things,” she said. “What is it people need to make them feel comfortable with this decision? That’s what you need to figure out.”
“Were people offering TVs three years ago?” she added. “Probably not.”
“It’s very easy,” said Mr. Geller. “The seller would reimburse the purchaser at closing from their down payment. They don’t even have to write a check.”
Cash-back at closing, however, can be used to cover a variety of incentives.
Jacky Teplitzky, a managing director at Prudential Douglas Elliman, says some of the most common incentives she sees are payments of capital assessments — which apartment owners pay when their building undergoes a costly project, like repairing the roof — and contributions to paying real estate taxes.
But if the seller is losing money anyway, why not just ask for less?
“This is after you lower the price,” Ms. Teplitzky said. “If that doesn’t work, what else do you do?”
Stephen G. Kliegerman, the executive director of development marketing at Halstead Property, says developers began offering incentives in November. “Following the Bear Sterns and Lehman Brothers collapse, developers saw the writing on the wall,” Mr. Kliegerman said. “Individual sellers take a bit more time to adjust to what’s going on.”
Chris Carolan and his partner, Vernon Bauer, have accepted that they will be taking a hit on price. They are asking $649,000 for their two-bedroom duplex with a garden. They paid $680,000 for it four years ago, and Mr. Carolan estimates that they have put $60,000 into it since.
“This is not how I thought I’d be selling this place,” Mr. Carolan said.
In addition, they have advertised that they will chip in $250 of the $950 maintenance for about six months. The mortgage on the building will be paid off in December, so Mr. Carolan expects the maintenance fee to drop.
Mr. Carolan said that he and his broker “were brainstorming ways to compete with incentives developers are forced to offer right now.”
“We thought it’d be a nice incentive to bridge the next owner over to the period when the maintenance is likely to go down,” he said.
They haven’t accepted any offers yet, but their broker, Tim Stanard, a vice president at the Corcoran Group, has had success with some bigger out-of-the-box incentives before. In May, he helped clients sell an apartment with roof access by encouraging them to offer $10,000 toward installing a deck. That apartment is now in contract.
Once a buyer and a seller agree on big-ticket items, sometimes it takes just a little extra cash and creative thinking to close a deal.
The co-op board at Michael and Paige Oristano’s Upper East Side building took about two months to approve their buyer, long enough that he needed an extension on his mortgage commitment, which locks in the terms of a loan. So Mr. Oristano offered to pay the $275 fee for a 15-day extension.
The Oristanos’ broker, Rose Tallis, a vice president at Halstead Property, said she feared that one extension would lead to another, and then perhaps another. But they were able to close on the 15th day. “This was just a drop in the bucket,” Mr. Oristano said. “It was a small price to pay to get this done.”
Friday, August 14, 2009