Being outbid when buying a home in NYC is very common. The most desirable properties can sell quickly, even in the worst of markets.
While the risk of being outbid cannot be entirely avoided, we discuss several strategies in this article which can help you mitigate the risk of losing out on your dream home to a competing buyer.
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Be sure to have your offer documentation ready so that you’re in a position to submit an offer the moment a suitable listing hits the market.
There’s always an advantage to being the first offer (or one of the first few offers) that a seller receives. If your offer is submitted early on and it’s accepted, a seller is much more likely to stick with you even if similar offers come in before you’ve signed the contract.
Remember that in NYC, nothing is binding until contracts are fully executed. So the mere fact that you have an accepted offer does not obligate the seller to proceed with you if better offers come in before contracts are signed.
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If a higher offer comes in after yours is accepted but before you sign the contract, a seller is much more likely to give you the chance to match the other offer instead of pulling the plug altogether.
While having to raise your offer price after it was already accepted might be frustrating, just remember that you’re still in an advantageous position since you’re being given the chance to match and move forward with the deal, whereas bidders who came in late don’t have this same optionality.
We’ll just come out and say it: it’s unreasonable to expect a seller to seriously consider a lowball offer during the first few weeks on the market. There is absolutely zero ‘first mover advantage’ to submitting a lowball offer in NYC, regardless of market conditions. This is particularly true if you’re considering a hot listing which is receiving lots of traffic from fellow purchasers.
Even if the property you’re considering isn’t a candidate for a frenzied bidding war, submitting a low offer on a brand new listing will likely offend a seller.
The consequence of personally insulting a seller is that she or he will always hold a grudge against you.
This means that a seller will likely prefer to sell to just about anyone else than you. Even if you subsequently raise your offer to a very competitive level, the seller will naturally be inclined to go with the buyer who didn’t previously offend them.
How much of an advantage you’ll have by being a first mover ultimately depends on how competitive your offer price is. Don’t be afraid to submit a full-ask offer or even go above asking right away if you really want a property and the comps support the asking price.
If your initial offer truly ‘wows’ the seller, they’ll be much more likely to accept it quickly or engage in a negotiation which could yield an accepted offer quickly. This is beneficial to you as a buyer since a quick accepted offer will naturally curtail a seller’s desire to continue showing, entertain other offers or sit on your offer, and this will lower the risk of being outbid before you sign the purchase contract.
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If on the other hand you submit a mediocre offer early on, a seller will feel compelled to sit on your offer and show to as many buyers as possible in the hopes of receiving better offers before countering yours. If your offer is too low, the seller might not counter at all.
If you’re bidding on a hot listing in a strong market, your number one risk factor is time.
If you really want a property, figure out how to yield an accepted offer as quickly as possible.
Before submitting an offer, work with your buyer’s agent to review comps and determine the fair market value of the property you’re considering. For a hot listing which might sell at or above asking price, you’ll have a much better chance of securing the property by submitting your best offer (or something very close to it) upfront.
Never assume you’ll have the chance to improve your offer when it comes to a hot listing.
If another buyer swoops in and outbids you, a seller might simply accept that offer outright.
Thereafter, even if you try to match, the seller will stick with the offer they already accepted. If you try and submit a higher bid, the seller will most likely give the current accepted offer a chance to match your new price.
Keep in mind that for the hottest listings in NYC, a best and final bidding process is likely inevitable regardless of whether you submit a very competitive offer early on.
Minimize contingencies
Having too many contingencies is the easiest way to lose out in a competitive bidding process. You have the best chance of yielding an accepted offer by submitting an all-cash offer or by submitting a financed offer which is non-contingent.
If you require a mortgage contingency, the reality is that you’ll always be second fiddle to a cash buyer. This means that for your offer to be accepted, there either needs to be no cash bidder in the picture or your price simply needs to be meaningfully higher.
That being said, there is a way to make your mortgage contingency slightly more attractive to a seller.
This involves removing a low appraisal as one of the grounds for triggering the mortgage contingency.
Under a traditional mortgage contingency, a low appraisal usually gives you grounds to renegotiate the purchase price or walk away with your contract deposit. Waiving the appraisal contingency specifically removes a low appraisal as grounds for you to trigger the mortgage contingency.
If you’re in a bidding war and you’ve agreed to waive the appraisal contingency subcomponent of the mortgage contingency, you’ll have a leg up compared to every other mortgage-contingent bidder.
Choose your real estate attorney wisely
The responsiveness of your real estate attorney can make or break your chances of securing a desirable property in NYC. The fact that an accepted offer is not binding in NYC means that every additional day a contract isn’t signed puts you at risk of being outbid. If your lawyer regularly clocks out at 3pm, doesn’t work on Fridays or takes days to respond during the contract negotiation, she or he might literally cost you your deal.
Therefore, be extra careful when interviewing and selecting a NYC real estate attorney.
Check out this article for a list of important interview questions when vetting real estate lawyers.
Assuming you’ve hired a highly responsive real estate lawyer, you can still do the following things to further minimize the timeline between accepted offer and a signed contract:
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Ask your buyer’s agent to request the due-diligence documents the moment there’s an accepted offer. While an experienced listing agent will have all of these items ready to send out with the deal sheet upon acceptance of an offer, some listing agents are less organized than others. Even if contract singing is delayed due to the seller or listing agent being slow in obtaining these documents, who is technically responsible doesn’t matter if the delay allows for someone to outbid you. Just remember: it’s all about results, not a blame game!
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For a condo or co-op, buyer due diligence documentation includes building financials, the Offering Plan, purchase & sublet applications, house rules, alteration agreement & decorative rider.
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Ask your lawyer to request the building’s board meeting minutes as soon as possible. Many building management companies don’t release digital copies and instead require your lawyer to make an appointment to review meeting minutes in-person.
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Ensure that the funds for the customary 10% contract deposit are readily available.
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Be sure to utilize wire transfer for the contract deposit and electronic signature for the contract itself to avoid delays and risks associated with mailing original checks and hard copies of documents.
