Comprehensive Guide to Submitting a Property Offer in New York

Buying a property in New York can be thrilling and a bit daunting, especially for first-time buyers. This guide breaks down the process of submitting an offer on a property to help prepare and educate you, the Buyer, on the nuances and considerations that should be evaluated beforehand. Let's dive in!

Timeline: From Submitting an Offer to Signing Contracts

The offer process can vary; some deals take weeks before going into contract, and others are done in as little as 1-3 days. Below is a high-level overview of the steps in that process:

Step 1: Obtain the Required Documentation and Assign a Buyer's Attorney

The first step is to obtain the necessary paperwork (detailed further below) and decide who you want to represent you as the Buyer's Attorney in the purchase.

Step 2: Preparing the Offer & Strategy

Organize and share the required documents with your broker, review the broker's CMA analysis, and discuss and finalize offer terms and strategy.

Step 3: Offer Submission

Submit the offer to the Seller's agent. If you are being represented, your Buyer's Broker will carry out this step.

Step 4: Seller's Agent Review

Once received, the Seller's agent typically reviews the terms, provides initial feedback, and confirms whether additional information is needed before presenting it to the Seller.

Step 5: Await Seller(s) Response

Wait for the Seller(s) to review your offer and provide a counter-response. The time it takes to get a counter can vary depending on the amount of interest, the number of offers, and the Seller's schedule. Sometimes, there are multiple decision-makers, and responses can take longer than expected. A listing agent who is a good communicator will set realistic expectations on when to hear back and adhere to those deadlines.

Step 6: Counteroffers

Be prepared to receive a counteroffer and renegotiate. It's uncommon for an offer to be accepted at face value. Most offers involve multiple rounds of back-and-forth. In a multiple-offer situation, you may be asked to submit your best and final offer by a deadline.

Step 7: Acceptance & Draft Contracts

If your offer is accepted, the next step is for the Seller's Agent to prepare a transaction summary detailing all the transaction terms and the names and contact info for parties on both sides of the deal. Once both agents have reviewed and signed off, an email with the term sheet will go out to all deal parties (buyers and sellers excluded). The Seller's Attorney will then prepare and send the draft sales contract to the Buyer's Attorney for comments along with any other pertinent information for review (i.e., building financials, board meeting minutes, surveys, etc.).

Step 8: Due Diligence & Inspections

The Buyer will then be instructed to schedule a time for their inspector to inspect the property. The expectation is that this be performed within a reasonable timeframe. Once conducted, an inspector will prepare and share their findings in a report. If any items were not disclosed or known, the Buyer can renegotiate the contract terms (within reason) or request that the Seller address select issues before closing. This whole process can take some time but is usually performed within 5-7 days, pending any delays.

Step 9: Contract Signing & Deposit

Once the attorneys finalize the contracts, they'll review them with their clients and prepare to sign. The Buyer always signs first and sends the contract deposit to the Seller's Attorney's escrow account, which will be held in escrow until closing. The Seller will then countersign. Congrats, you are finally in contract!

For this guide, we're focusing on Step 2 and diving deeper to explain how to prepare an offer.

Preparing the Offer: The Terms & Required Documentation

Terms

A complete offer clearly outlines the transaction terms under which you're willing to purchase. At a minimum, it should detail the purchase price, contract deposit, any contingencies (like financing or inspection), the proposed closing date, the downpayment ($/%), and any additional terms about the sale.

Attorney Representation

The offer should also state your attorney's name and contact information; a prepared Buyer will already have spoken to an attorney to enlist their help. If you don't have one yet, check out our list of preferred contacts at Byson Here.

Pre-Approval Letter or Proof of Funds

If you're financing the purchase, you must attach a pre-approval letter from your lender. This shows the Seller that a bank has reviewed your financial documentation, run credit, and approved you as a credit-worthy borrower up to a specified loan amount. For cash buyers, it's best to include a letter from a CPA or a bank statement showing you have the funds available for the entire purchase amount.

REBNY Financial Statement (For NYC)

In New York City, Buyers purchasing a condo or coop should also fill out and attach a complete REBNY Financial Statement Here. This document gives the Seller a detailed snapshot of your financial situation (total assets, liabilities, and annual income) to assess your financial standing without sharing personal bank statements. It also shows your ability to meet the condo/coop board's financial requirements (post-closing liquidity, debt-to-income ratio, etc.).

Letter to the Seller (Optional)

While not mandatory, a personal letter to the Seller can tip the scales in your favor. This letter usually expresses what stood out about the property and why you're the right Buyer. It adds a personal touch to your offer, which can be persuasive in a competitive market.

Valuation and Pricing

Buyers often ask, "What's a low-ball offer?" or "Where should we start?" That depends. Are there competing offers? Was the property recently listed? Was it intentionally listed below the market to elicit multiple offers, or is it overpriced?

The truth is that each transaction requires a tailored strategy, but the end goal is always the same: to receive an accepted offer at fair terms. And yes, there are best practices that ensure a higher likelihood of success, which we cover below.

This is where working with an experienced Broker has a high impact; you need to consider all of the following while being efficient to take advantage of the opportunity, be professional so the other side wants to work with you, and be informed. At Byson, our approach starts by performing a Comparative Market Analysis (CMA) of the subject property.

CMAs: Determining the Fair Market Value

Our valuations are modeled after those of appraisers. For condos, coops, and single-family homes, we use a comp-based approach. This means we look at recently sold comps (typically between 3 and 5) to determine the value of the subject property. You might be asking, "But why not include that property down the block that's been on the market for 180 days?"

We use sold listings for the CMA because the data is more dependable and reflects the price buyers are willing to pay for like-kind product. Whereas, active or in-contract listings can sometimes be inflated. That said, if there are limited comps, we may include active/in-contract listings and assign an estimated sales price.

This analysis compares the subject property to each comp selected, comparing attributes that impact a property's price (e.g., location, views, interior and exterior features, square footage, condition, etc.). We then adjust the price, using generally accepted industry standards, to arrive at an estimated fair market value for the subject property. If priced fairly, our price should be close to the asking price.

Key Considerations

Once we've determined the property's value, we consider other factors that may drive our approach:

Ask Questions

We're constantly asking questions, from the first showing to before the offer is submitted. We want to understand the performance to date, learn more about the Seller's motivation, and understand if there are any other offers on the table. If so, at what price? This is valuable market knowledge, even if this isn't the right property for you. Some agents are more willing to share than others.

Days on Market "DOM"

The number of days a property has been on the market also impacts how we approach the negotiation. For instance, if a property is newly listed (1-10 days), chances are that the Sellers will be unwilling to accept an offer significantly below their asking price. It's likely they are still receiving inquiries and showing requests; accepting an offer before giving all prospective buyers a chance to tour the property and submit offers would be premature. Conversely, a property sitting on the market for 60+ days might make the Seller more receptive and open to negotiating and accepting an offer below their asking price.

Market Data

While some of the findings here may overlap with those in our CMA analysis, we also analyze the market and, in the case of a condo or coop building, in-building sales history to understand key data points like the average days on the market, number of listings currently on the market, average discount percentages, and countless others that provide us with valuable benchmarks.

Property/Listing History

How long has the Seller owned the property? What was their purchase price? Have they made any improvements since owning it? Have they previously attempted to sell? Let's imagine a scenario where a Seller has tried to sell twice previously before delisting their property with no price adjustments. This could mean they have unrealistic price expectations or are unwilling to negotiate. While we're drawing some assumptions, you can pick up a lot by reading between the lines. It could also be unrelated to price and indicate that the property might be challenging from a resale perspective.

Seller's Situation and Requirements

It's important to understand the Seller's timeline, where they're headed next, and whether they need the funds from this sale to make future purchases or have an outstanding mortgage, to name a few. Understanding the Seller's circumstance beforehand can reduce some back-and-forth during the negotiation and allow you to submit an offer viewed more favorably than another.

Competing Offers and Interest

Was the open house you attended flooded with Buyers? Does our market analysis show that most properties have been trading at or above the asking price? Has a competing group already submitted an offer, or is the listing agent expecting others? While in principle, it's frowned upon to renegotiate accepted terms. It happens all the time, especially in New York State. Acting swiftly before other parties submit can significantly affect the final price. Remember, nothing is final until that contract is signed.

Buyer Requirements

Each Buyer should ask themselves the following questions. If not at the start of your search, certainly before you submit an offer. It is always better to define these upfront, while you're clear-headed, and before you are emotionally invested in a property.

• What's our monthly budget? Factor in HOAs (Common Charges/Maintenance), Taxes, Repairs, Landscaping etc.? Be honest, don't undershoot the numbers to make it work.
• How much money can we reasonably put down? Without needing to liquidate investments or ask family for assistance.
• Get on the same page as your partner and prioritize what's most important to you. At every price point, we remind buyers that a concession is always made somewhere.
• What's your timeline? If you don't find something, what's the contingency plan?
• Are we willing to perform renovation work? If yes, to what extent and do we have enough money set aside post-closing to cover those expenses?

A Broker's Perspective

Unless you're a contractor flipping homes, it's not every day you're purchasing a property or negotiating offers. But, as a Broker, it's what we do every day. Here are some things to keep at the forefront of your mind as you go through this process.

Free Markets, The Invisible Hand & Law of Averages

A quick economic lesson for those who didn't study it in college. Economist Adam Smith coined the concept of "The Invisible Hand." The invisible hand is a metaphor for the unseen forces of self-interest that impact the free market. In theory, consumers base decisions on self-interest, creating a positive economic outcome. The real estate market is a free market like any other, and as a broker, I'm still amazed when we see this economic theory in real time. Nothing prevents a Seller from asking an astronomical number except a buyer's unwillingness to pay above-market prices, which keeps things in check. Every property has an intrinsic value, and yes, it varies slightly from one individual to another. However, the law of averages still applies, and units that are overpriced will sit on the market.

Knowledge, Patience, & Flexibility

Finding the right property takes time. The more informed you are about the market, the easier it is to ascertain a good deal from a bad one. Sorry to say, but scrolling StreetEasy is not the same as touring properties in person. Having flexibility for when you need to buy also provides you with a lot of freedom and gives you the ability to negotiate with some power.

Hire Experienced Agents

Working with an experienced broker can make all the difference. While often overused, a home is the largest investment for most individuals. Hiring an individual to represent your interests in that transaction ensures someone is looking out for you, that you purchase at the right price, that you consider future resale value, and that you take advantage of good opportunities when they arise.

At Byson, we strive to support and guide you through this process with data-driven insights and personalized advice. Whether you're a first-time homebuyer or a seasoned investor, our goal is to help you navigate the offer process confidently and successfully. If you have any questions or need further assistance, our team at Byson is here to help. Contact us today here to speak!