2023 was a year of twists and turns in the New York City’s real estate market. While we were able to navigate this challenging time for our clients, not every buyer or seller was so lucky. Many buyers expressed frustration about the lack of inventory. Many sellers chased a market down to find the right level for their sale. But some clients found surprise- to the upside. Our closing at 316 W 116th St #3A, is our deal of the month, and an example of finding a diamond in the rough, the rare distressed sale in New York City.
At first, all we saw was a 2000 square foot three bedroom, two-and-a-half bath condominium that was asking less than $1000 per square foot. It already was asking 10% below where another recent sale in the building had landed. What we didn’t know was that the owner had filed bankruptcy.
Distressed sales like this are unique in New York (isn’t that a tongue twister?). Few sellers get themselves into that much trouble, which makes sense in a market where the down payments are often higher than the purchase prices in other markets. In this case, our buyer put down $400,000 to buy their nearly $1.75mm home. So you get the point: We felt like someone who had found the Loch Ness monster, the Yeti, and the Abominable Snowman, all rolled into one!
When The Sellers Files for Bankruptcy
Yet it’s weird when you find out that your buyer has accidentally fallen in love with a property where the seller is in trouble. It changes your mindset. You’re no longer asking the seller to fix anything; they have no money. You’re not looking for the seller to show any good faith; you’re not actually dealing with them, but a bank. And you’re not negotiating with the seller, anymore, either. You’re up against a bank who just wants not to take too much of a hit.
The extra costs to lock down this property were low. You could even say they were zero, because many buyers want to get inspections, anyway. We needed to make sure we knew what, if anything, was wrong. Because the buyers needed to assume they were on the hook to fix anything. They priced out window repairs, and considered what might break in the coming few months.
Once that was done, the buyers pushed hard on the final negotiation. What was $1.78mm became $1.73mm, and the contracts were signed. This represented nearly 15% less than the last sale. So, a win.
Delay Isn’t a Bad Thing
The next win? The delay. Many buyers might not like a sales process to take time, but in this case, the sellers wanted to wrap things up with the sale of their home, which, in this market, took a little extra time, too. In the bankruptcy court taking its sweet time, there was no overlap between one sale and the next. So our buyers saved more than $20,000 in that delay. You could think of it as another 1% savings.
The last win? Bank approvals on our end. In a bizarre twist, our buyers had a little bureaucracy of their own to manage. I’ll explain.
Underwriting is Weird
One could argue that the safest job in the world, after Supreme Court Justice, is college professor. For a bank, that should mean an easier time underwriting a buyer who is a college professor. Their income is super safe, right?
Not so fast. Our buyer was on sabbatical. And even though he was getting paid during his year off, the underwriters for our buyers’ bank wanted to see our buyer actually “back to work” before they would approval the loan. Luckily, the seller delays meant that his school year started, with him back in the classroom. What a strange need for a bank! And the seller wasn’t putting any pressure on us to close, because they had no say in the matter.
In Summary
Our buyers got a great deal on their purchase. They had time to get their loan approved and to avoid a lot of overlap between their sale and their purchase. And the lender who was waiting for the sale was happy with getting the proceeds. Of course, we may end up waiting two months for the bank just to approve paying commission to the buyer and sellers agents in the deal (of which we’re the buyer agents), but we’re content waiting.
It was the rare distressed sale, and we were thrilled our buyers were on the receiving end of it!
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