More on the state of the apartment market
This is a verbatim quote from an email from an agent listing an apartment building in a nice part of the Valley:
“Yes, it is available, but seller is now asking $50k over listing price. Need an offer all cash at listing price or above no contingencies. That is the only way.”
I’m keeping the name of the broker confidential, because he’s a very nice guy and he doesn’t control his clients any more than I do. But let’s unpack the wording above, to see what he means:
- “Seller asking $50k over listing price” – Pretty self-explanatory; seller has seen a lot of action on his property, senses the direction of the market, and is now greedy.
- “Need an offer all cash at listing price or above” – The reason the offer needs to be all cash is because no bank is going to finance more than 50-60% of the acquisition price because otherwise there’s not enough NOI to service the debt (see this article on debt service coverage).
- “No contingencies” – I’m asking you to come in and either (1) do your inspections without having the building in contract, meaning you risk your time and money with no assurances that you’ll actually be able to buy the property, or (2) Be totally insane and offer to buy without doing any due diligence.
I don’t claim that this one email is any sort of scientific sample of the state of the market. But, boy, do the sellers seem to have the leverage these days!