Brooklyn Secret Agent: Lines at Open Houses

Today we bring you an anonymous weekly column about real estate by one of the most experienced agents in Brooklyn:
WHAT is going on here? This week I listed a new house. It is on a previously shunned Carroll Gardens block and it is small — 2,000 square feet. It has been totally renovated and has a large, lovely garden. The sellers and I agreed that we would reach a bit and price it slightly above where we felt the market is at right now. Fingers crossed.

I arrived for the Sunday open house 10 minutes before the start time. Cars were double parked and people were bunched up outside, all waiting to see it. That was a first for me in all these years — a crowd waiting for an open house?

After two hours of the constantly packed open house, during which one buyer and his broker came up to me and demanded to know “What will it take? We know how this works,” I closed up. I had given out more than 75 show sheets and there were 82 separate groups who had signed in. 82!

As soon as I got back to the office, and up until I turned my phone off at midnight, the offers poured in. There were 10 of them, all at or significantly above the asking price. Two buyers tried to prevent a best and final round by going quite high. More than half of the offers were either all cash or had no mortgage contingency. The next day two more offers came in. Requests to see the house were nonstop, too.

I sorted through each offer, making sure I knew where the money was coming from, that the preapprovals had some weight, and what the income and assets of each buyer were. One buyer was way above the others but the details were sketchy — did they need to sell first? Their broker did not know, which wasn’t helpful.

The sellers and I conferenced. After reviewing the spreadsheet I made, they decided they wanted the highest number, even if the likelihood of actually getting to closing was iffy. Not a surprise — it usually goes this way. But they asked me to hold a best and final round in hopes of getting that high number with good finances. By the time you are reading this, those final offers will be in and a decision will be clear, we hope. There will be 11 disappointed buyers.

Now that high number, which would have appeared ludicrous one week ago, is the new normal. I continue to ask, WHAT is going on here?

35 Comment

  • yup. just dealt with this (i’m the buyer) a few months back. I made an offer and then 2x I upped that offer, once significantly. I was under the impression that my particular situation (no contingency, pre-approved) was a plus, as well as the fact that the broker alluded that the owner really wanted a family in the home.

    and guess what? i lost. highest bidder, please! and by what, 3%? Who the heck knows. i’m not putting myself into a chasm of debt for a property. greed takes over and the homeowner is gambling with a contingency that obviously bid more but not with a sure thing. oh well.

  • Damn. I thought things would never get as crazy desperate as when I bought 6 years ago, but I’ve never heard anything like this. Is it just that there’s low inventory? Or is it only like this in prime neighborhoods?

  • daveinbedstuy

    Wasn’t like this at all when I bought in 2007, nowhere.

  • Lines at Open Houses? I knew drugs had to be involved with all these crazy prices.

  • No inventory…stories like this makes me REALLY glad that we got in when we did, before Brooklyn was the mega-overhyped town that it is today….back in the day when our neighborhood (Prospect Hts) was a well-kept secret….and we could buy a house for a fairly reasonable amount of money!

    Question for Secret Agent – what is the asking price on the house and how much have the top offers been?

  • is this hysteria also affecting coop and condo sales in these areas?

  • USGrant

    Low inventory. Yes. Plus folks being priced out in other neighborhoods. Throw in folks outgrowing their apartments. Sprinkle with investors/speculators focusing on a hot neighborhood. Add the feeding frenzy that is self-fulfilling at open houses – and you have the perfect storm. I think all of this will end within1-2 years as inventory hits the market. I don’t think that the base prices are going to go down by much (if at all), though. The frenzy should just abate.

  • It’s happening now for a few reasons, I think:

    1. People realize that even with the worst crash since the Great Depression, NYC (and Brooklyn) are still highly desirable as more and more people move to cities and move away from rural areas.
    2. The inventory is lower than it’s been since they began tracking these things.
    3. So many people waited out the crash and now there are lots and lots of people with children who need bigger spaces.
    4. Brooklyn is now the hottest spot on the planet. Sure, lots of it is hype, but people do seem to love it here. The cache of saying you live in Brooklyn is now so cool. How fun/ny is that?

  • Most interesting is that banks are still as difficult as they have been over past couple of years to give mortgages.

  • daveinbedstuy

    Not Hudson County Savings….my lawyer says they’re doing a lot in Brooklyn. When I sold mine, the appraisal came in right at the sale price!!!!!!

  • The low inventory thing is happening in a lot of markets. I think a lot of people are holding on to their places because trading up is so expensive – sticker shock for price escalations due to low interest rates. It seems kind of spooky to me.

  • expert_textpert

    The suburbs are gonna be alot more desirable for many.

    • I went to an FHA counseling meeting last year in Bed Stuy…assumed everyone there would be like me…trying to figure out how to buy a house in Bed Stuy.

      Nope…by raise of hands EVERYBODY was considering a move to Westchester or the immediate suburbs. They were mostly black women who had lived in Bed Stuy / Crown Heights / Brownsville for many years.

      Small sample size I know (maybe 30 people) – I thought it was interesting, anyway.

      • daveinbedstuy

        Well, somebody has to sell these houses to the newcomers. Everyone els on my block has probably owned their house for 40 years. Mine was the first to turnover due to a death.

      • Well, if they were single women (assuming so since they were at this type of workshop alone) with long ties to the neighborhood they are likely priced out of the Bed-Stuy market and/or not willing to handle the renovation and upkeep of the average brownstone.

  • Is it just me or did this post give enough info to figure out who the “secret” agent is?

  • I think most of this demand is coming from New Yorkers who live downtown who are looking at buying now. The markets downtown are almost consistently at $1,750PSF and higher. Alternatives? Brooklyn or move to midtown, UES or UWS. For everyone in the world below 23rd street there is not even a choice in the above matter. Brooklyn is by far more appealing than the alternative. Presto, you have tons of NYC buyers flooding into a low inventory market.

    I know the drastic price increases are hard to swallow, but a West Village townhouse that is 2700sf sells for $3,500psf (closed December) it should not be a surprise that $1,000PSF for renovated TH in Brooklyn with the same square footage is a great deal to these downtown New Yorkers.

  • no-permits

    i think you gave yourself away with all this information…

  • yes to fitzhume and to elbow.

    downtown manhattan still makes even prime bk look like a bargain…

    and if you managed to buy ahead of this most recent spike, why sell now? yes, people are getting frenzied, but there’s little incentive to list unless a) you’re kicking so much @ss that you have the cash to make a significant move upmarket; b) you believe some BHO-style narrative for why the market will dive; or c) you’re planning to leave nyc.

  • I went to an open house at Crown Heights and the broker said there were close to 300 people before me. How crazy is that? and I kept reading about all these cash offers and wonder who are the people putting in all cash offers?

    • well i bought in early 2009 and it was scary who knew for sure what would happen so im not that sympathetic for those who waited to see which way the wind blew, also im a native new yorker pushed out of the LES so some hypster liberal can pay to play far as i care

  • Cate

    Could the rush have something to do with wanting to buy while interest rates are still low and before the higher/longer rates for mortgage insurance on FHA loans kick in?

    • BigGuy22

      I think the rates are a major reason why people are jumping in to these multi fams, also rents are on the rise and have been. You get a lot more bang for your buck today compared to a few years ago. There is also a romanticism about Brooklyn and buying a brownstone here. I had 55 people at my open house in Bed Stuy on Sunday…bidding war…accepted offer well over the asking price…cash buyer. Had a financed buyer that went even higher than the cash buyer but seller chose not to deal with appraisal issues that will certainly come up. No inventory, low rates & High rents . a year ago, this house would of sold for 450k and because its a little deeper in bed stuy than most want to be it would of been like pulling teeth to get the right buyer…Oh and the house needed a complete gut.

  • Same thing for coops and condos too. There was a listing in my building and I couldn’t believe the foot traffic. Neighbor said there were 80 sign ins.

  • I doubt it’s low rates. Many are closed for cash. I was even told by one broker that I should submit an offer with no contingency as a plus. It’s almost as if they are not interested to deal with me if I don’t do that. :(

  • Imagine how high the offers would have climbed had the owners made their bed prior to the photo shoot.

  • Things have really changed in 2 years. Was selling an apartment and buying a house then and there was none of this, at least not to this degree. Why is there such a lack of inventory? (Sorry, haven’t yet read all the comments here. )
    Glad I’m not trying to buy right now. It’s stressful enough under normal circumstances. Sympathies to normal folks trying to do so.

  • This is not at all surprising to me. Even when i was looking in 2007 i was encountering a group at an open house, waiting for the listing broker to show up. Most recently a unit in my bldg was for sale, back in Aug of 2012 and there was a group of 15 waiting for the open house to start. For a 1 bedroom. Its only gotten worse.

  • Being a serial buyer/seller and LL in brownstone Bklyn, I’ve been watching the ups and downs of the market for the past 20 years. Certainly in areas like PS (which I know best), demand has never really abated, except for brief pauses. I agree with posters who believe that a confluence of low rates, higher rents, pent-up demand, and buyer confidence is driving the current market.

    Also, international wealth in emerging markets is a factor. As the rich in Asia, Russia, Latin America, etc. seek safe-havens for their wealth in the form of Manhattan r.e., this drives local buyers into Bklyn. For example, I was having lunch with some businessmen from China, and they were explaining that they can’t simply open a brokerage account and invest in securities outside China – there are many prohibitions designed to keep personal wealth from leaving the country. But, real estate seems to be the best way to get $$$ out without penalty or detection, and NYC, London, Canada, Hong Kong, & Singapore seem to be the favored safe-havens for r.e. investment.

    My own PS bstone has certainly doubled in value over the past 10 years, but when you think about it, that is an annual return of about 7-8%. Certainly, better than the stock market over the same period, especially when you add in the fact that I get to live in it, enjoy rents and tax deductions, and borrow against it at historically low rates, but it doesn’t exactly make you go “wow” when you look at the big picture. Markets don’t move in nice neat orderly progression – they often gyrate wildly, and that tends to provoke a very emotional reaction to what is perceived as big price moves within short time spans.