What are some of the concessions developers are offering Manhattan real estate buyers in this luxury market? Take A Look!
252 East 57th Street was built in late 2014. After a period of very slow sales with 95 units, remaining developers decided to step up the level of concessions they are offering. Last year they offered price cuts and in addition, this year they are offering 4% commissions to brokers including a 1% non-refundable commission when a contract is signed.
Discounts are old news and have been happening many months already especially in areas such as midtown where there is so much new development inventory. However, price reduction is not the only way that developers are trying to attract Manhattan real estate buyers. Developers are offering to pay transfer taxes, offering discounts, handing out gift cards and other items to try to sweeten the deal for buyers and their brokers.
New developers’ goals are all about getting the deal done as quickly as possible. They do not want to give off the impression that they are lowering prices. In buildings with a lot of unsold inventory, offering concessions is a good way to spark sales and move the inventory along. This is a smart thing to do! Developers who have construction loans coming due are more anxious to stave off the lenders who nervous about being paid.
Time on market has increased for some buildings that were planned in 2014 and 2015. New development sales have dropped 13.2 percent year over year according to our real estate expert and Douglas Elliman market report publisher Jonathan Miller. The average number of days on the market jumped 20.7 percent to 181 days during that period.
A number of new developers have just taken a pause and are waiting for the market to improve. However for those new developers who have no pause options it is a buyers’ market and great deals can be had.
Buyers are in control now and are pushing the developers for concessions to close the deal. Manhattan real estate buyers are pushing to have their closing costs, transfer taxes and mansion taxes paid by the developer. At the end of the day what matters most is what the developer nets. Therefore, if the buyer is making a higher offer and they want their closing costs paid then a deal can be struck.
Many developers remain very quiet about offering concessions while others use them as a marketing tool. Toll Brothers offered to pay transfer and mansion tax in some of their buildings and promoted it as a sales event. Toll Brothers is one of the few developers to take this approach across multiple buildings. Usually developers focus on each building.
In ultra-luxury condominiums, starting at $10 million the savings on mansion tax and transfer taxes can be a lot! For a $10 million home mansion and transfer fees come to 2.5% or $250,000. Also if the developer chooses to pay the buyers’ attorney fees that could be an additional several thousand dollars savings.
Negotiating some of these costs are more likely to take place in the $2,000 and over a dollar per square foot range of condominiums.
Here is a list of creative concessions that some new developers have added to the list to get their units sold.
- They may pick up the cost of design modifications.
- One developer of an uber downtown townhouse is throwing in a Bentley worth @ $200,000.
- Gift cards worth $2,000 to $4,000 were being given to brokers and buyers in one development in Brooklyn.
- Some developers spend their dollars luring brokers. Extell offered 50% commission advances to brokers in some of their new developments. This move really got the brokers’ attention. There may be more of this in the future especially in midtown where there are so many units on the market. This does not sell units however; it does attract the attention of the brokerage community.
In some cases, developers are resorting to making price cuts. Some of the new developers are recognizing that they need to price to today’s market in order to get deals done. Manhattan real estate buyers want to see some discounting. Many properties that were priced above $15 million have received pricing adjustments that make more sense for the present market. In the market for a luxury condominium? Now is the time to negotiate an excellent deal.
Read more about this topic in my blog, “How to Get Concessions When Buying in a New York Luxury New Development“