Hypothetical for realtors

Re-posting because it seems all the formatting in initial post was lost:

Here is a situation where were I realtor, I would be grateful for the clarity provided by the regulations as I currently understand them. Purely hypothetical, of course: Let's say you got a listing for a unique, totally renovated coop in a niche neighborhood. Your instinct was to set the price at X for a variety of reasons, which you initially did. You told your sellers to expect this because of the nature of the product.

However, after two weeks on the market, your sellers insisted on lowering the price by 5%. You said "okay," but that might generate too much interest, and potentially not the "right" interest.

Sure enough, with the lower price point, there was immediate interest, resulting in multiple offers. The offers are in the ballpark but, given the interest, your sellers counter with what is effectively a non-counter (sellers give so little, that sellers are effectively holding firm).

Showings continue, and sure enough, along comes a buyer who understands they cannot duplicate what your sellers are offering for anything close to what they would be getting at ask. They are qualified.

Prospective buyers' future: You cannot say for sure because you don't know, but you sense the apartment you are selling is not likely going to be prospective buyers' "forever" home. They have a young child and are upwardly mobile. Statistically couples like that may have more children and continue to make more money, at which time they would want a larger apartment?

You also sense, for whatever reason, that the prospective buyers are not dialed into long term trends of pre-war coops in established neighborhoods in NYC and might be thinking that if/when they grow their family, they will just sell this beautiful apartment and trade up.

First question: Were you representing prospective buyers as a buyer's broker, how would you advise them? Would you offer any insight into potential long term trajectory of the product or would you view that as too speculative?

Second question: If you were representing the sellers, I am thinking that you would be grateful for the clarity provided by the current regulations with respect to what you should/can do because you have a fiduciary duty to the sellers.

What I would do were I the buyer's broker: If I am being totally honest, I really don't know. I would like to think I would advise these prospective buyers that I think the purchase would result in a loss of capital down the road if they ever wanted/needed to sell, but I am not sure that I would actually do that if the potential commission would move the needle in my immediate financial picture.

Were I the seller (purely hypothetical of course), I would be conflicted about watching the party on the other side of the table make what I think might be an uninformed choice, but I really don't know enough about the prospective buyers to know anything for sure, so I rationalize that it is inappropriate to project my own feelings on to these potential buyers. Indeed, my thinking that I might know better than they do is arrogant and paternalistic.

"Purely hypothetical, of course: Let's say you got a listing for a unique, totally renovated coop in a niche neighborhood. Your instinct was to set the price at X for a variety of reasons, which you initially did. You told your sellers to expect this because of the nature of the product. However, after two weeks on the market, your sellers insisted on lowering the price by 5%. You said "okay," but that might generate too much interest, and potentially not the "right" interest. Sure enough, with the lower price point, there was immediate interest, resulting in multiple offers."

This is such a stupid scenario.
$2.0M co-op listed at $1.9M and the interest goes from nothing to "too much" and "not right" as in "not the right type of people."
Over $100K.

I am not really in love with the concept of dual agency (representing both parties). A listing agent's first responsibility is to the seller. I can give both parties the required disclosures, and layout my concerns, but it's ultimately up to the parties. Dual agency is legal in NY, but it's not legal in a lot of other states. This is one of those issues that it only takes one or two bad actors with just the right parties involved to cause Dual Agency become illegal in NY.

Most of my business would be considered niche neighborhood coverage (Mostly the West 90's to the West 160's) - likely not the neighborhood you are referring to, but still it's a niche specialty product knowledge.

When I am working as a buyer agent- I am listening to the buyer's wants, needs and listening for their longer term thoughts. Now in Upper Manhattan, most of my buyer clients are looking for larger spaces- which is why they are looking there in the first place...but if they were trying to cram into a space that won't work for them very long, it is something I will be speaking to them about. I have advised buyers about the nature of the product they are considering purchasing as a frequent topic. For example- there are a large number of condo conversion buildings in Hamilton Heights/lower Washington Heights- with lots of remaining RC/RS tenants in these buildings. The conversion rates range from 25%-65% in most of these buildings- and they might not change much in the near to mid term. This is a higher risk situation, and a lot of time buyers see the larger spaces, and ignore the fact that few bankers want to underwrite with such a large number of units owned by the sponsor or large special assessments could hit them because the sponsor keeps common charges artificially low, and it could also impact them at resale.

Not all brokers are willing or informed enough to provide the buyers and understanding of the risks of the product type. My role is not that of an attorney providing legal advice, but if I am aware of any risks in advance of an offer, I do provide my buyer client with everything I know about the situation.

Buyer brokers are mostly not equipped to give investment advice. Their advice is more like, is this price in line with recent comparables, what else is on the market for this much money, etc. Their objective is to find a property within budget that meets given criteria, and to make sure it is a smooth transaction etc. Not to debate criteria and budget, or make wild guesses about future value, number of kids, etc.

Why do you think the buyer does not understand trends? If a buyer plans to have more kids and upgrade apartments in the near future, why buy at all? Could buyer be thinking they will buy a house in another city or suburbs with more kids and keep a pad in the city for business trips?

I agree. Why would the seller care about the long term health of a building they are planning to leave?

@rinette - well, that "stupid" scenario materialized over $105,000. What else would you attribute zero interest changing to multiple offers?

@Uptown - In this hypothetic, buyer has their own broker; no dual agency.

@krolik - No specific information to support suspicion; I just can't understand why a young couple with a small child would consider this apartment unless they had trust fund wealth.

@stache - seller is concerned that young family is making a choice that will be more expensive than they might think. However, the more I think about this, the more I realize the board will cover this concern when reviewing the applicants. The board won't approve anyone they fear won't be able to afford the apartment indefinitely.

As a buyer's agent for a client that will live in the apartment- a lot will come out in the conversation with that buyer and I try to get deep into their motivations, lifestyle, etc. As an advisor, rather than an order taker, I might have some suggestions of buildings- whether or not any apartments are for sale in the building right now or not- depending on the clients wants, needs and priorities. There may be variables you aren't considering as the seller. I have had buyers come to me stating we need to be within this 3 block vicinity with a variety of reasons/justifications. I had buyers that have had real or exaggerated constraints- so my job is to dig down and learn whether these points are immovable or not, and to work with them to the degree it's possible.

Long term viability of the purchase- yes, this is often part of the conversation- though it's case by case. Here is an example- I have a client looking to bring their aging parents local from out of state so they can care for them locally or they can give their parents their existing condo and buy what they really want for themselves. These 2 possibilities are often poorly aligned with one another so listing agents don't quite know how to interpret the buyers interest. Right now they are considering buying an apartment specifically for the parents rather than for themselves- because the purchase solves some of what they need. They aren't in a position for a perfect solution- so we go with what works for a handful of years. They understand to lock in the opportunity that works best right now they may have to pay a little above market. If they ultimately sell that apartment in the future for a small loss, they can reasonably justify that it was the opportunity cost of solving a problem they needed to address. But the most important part of all of this is that I helped them understand the pro's and cons of each situation- and it's this advisement that is valuable to the client.

What might seem like a poor solution to someone, might not be the reality- but you as the seller likely don't have access to this information.

@Uptown - Thank you for the exposition of what a buyer's broker I would want representing me brings to the table.

>>> I just can't understand why a young couple with a small child would consider this apartment unless they had trust fund wealth.

Me neither. So they probably do have trust fund wealth, in which case, they should just go ahead and buy the apartment that they think is nice (and you think is overpriced).
How young is the couple?

I don't know anything about the prospective buyers beyond young couple with a small child, and I realize that I am totally projecting because I just see the apartment as perfect for empty nesters and can't imagine a child in what is such an adult space in my mind. I am also projecting to the extent that I am the one who chose the building for myself and would not have done so had I known exactly how expensive it would end up being. I am comfortable viewing real estate purchases as consumption, but I am not price inelastic.

You’re overthinking it, MCR. Look at yourself, for example, compared to me. You’re RE choices are bizarre to my lifestyle ethos, and I’m sure vice versa. Who knows what this couple is thinking, and who cares. Take the money and move on.

I think the apartment is fine for a young couple with a child. The kid’s got a bedroom. There’s a separate room in the building for a home office, or for a live-in. Yeah, a kid will scuff up those nice walls and get handprints all over that mirrored kitchen island. Nothing a little corporal punishment can’t solve, if you ask me, but so many people live with such disarray, lack of style, and lack of care that a young child’s “misdeeds” might serve as a welcome excuse.

>> Nothing a little corporal punishment can’t solve

This is a joke, before anyone throws a fit.

@nada - I think in the new order, corporal punishment of children may be back in vogue. Truth be told, many of us who were kids in the 70's openly admit that the spectre of it was a rather effective parenting tool in shaping our behavior. My parents never hurt me, but both my mother and father had a reproachful pinch that kept me in line.

"Who knows what this couple is thinking, and who cares. Take the money and move on."

This. I am adjacent to two separate renovations (1 house, 1 apartment) that make no financial or aesthetic sense to me, and in one case would have substantially saddened the prior owner (she and husband built & modified the house to their interests). When I'm gone (or if I sell), my house will probably be renovated into something I wouldn't recognize, and in a despicable style. The new owners will love what they do, and that's their joy.

(I was a recipient of rather a lot of corporal punishment in my youth. Shaped my behavior generally positively, wrecked my relationship with my father.)

Goes to show you the difference between a $2 million apartment and a $1,995,000 apartment