By Ian Slater | August 13th, 2020
I am having consistent conversations with buyers all throughout the day asking what the “COVID discount” is in the market today, specifically in Manhattan, and what discount they can expect if they purchase a property today. I have many more conversations about people who prophesize that New York will get significantly worse if there is a second wave of the coronavirus in the fall, and property values will fall accordingly. Everyone seems to be out for the major discount, but nobody can really tell what it quite is.
I know from holding thirty listings at the moment of price point from $399,000-$24 million, exclusively in Manhattan, that there are a high amount of showings and also a high amount of offers-- those seeking 30 percent discounts are not getting them because frequently properties at all price points have multiple low offers they are negotiating with.
There are many buyers who have decided that the discount they are to expect is 20-40% off of asking prices. The point of my blog post today is to state one simple point and to implore my clients and followers to look at the market intelligently and to seek value over discount.
A property that sells for 40% off in the market today is very likely either overpriced, has outside non-COVID pressure on it (view blockage, lawsuit in the building, individually distressed seller), or is in terrible condition and lacks any positives of a New York apartment (view, solid building, good architecture, updates, location). A buyer who buys that apartment may not be getting such a great deal value-wise, but they did certainly get a discount.
A buyer who seeks to enter into a property that holds long term value and gets it at a fair price, which I fully agree should be discounted from pre-COVID levels given changes in supply and demand, will make out better. The problem is, more buyers will be looking at that listing and therefore the discount will not be as great-- it very well may not be there at all! It does not mean it is not a better buy than something selling for 30-40% off.
When a property is priced at $5,000,000 but is valued at $3,000,000 and you end up purchasing it for $3,000,000--- did you get the greatest deal of the century because you got 40% off? No-- you got a fair deal.
It would be wonderful to pay our attention to the values, as what will occur in the market if the only focus is on discount, is that many buyers will end up purchasing poorly choices properties and will not make the long-term killing that they are expecting to.