A terrace from a penthouse where the seller took $680,000 off the price to close.
Sotheby’s International Realty
Real estate attorneys are helping a growing number of clients who want to tear-up agreements they signed before the COVID-19 pandemic erupted and the city was shut down.
“It’s open season on contracts,” said attorney Scott Claman. “More contracts are sick and dying than people from COVID.”
Claman is a member of a group that calls itself “Covid-19 vs. Residential Real Estate Transactions.” Twice a week, as many as 50 New York real estate attorneys congregate on Zoom to discuss their latest negotiations. The virtual meetups were started in April by attorney Bruce Friedberg to discuss a myriad of closing issues, including home buyers seeking discounts on the price of the property after the contract was signed or concessions on closing costs and transfer taxes.
The attorneys also trade tales about clients who want to walk away altogether. When that happens, they then try to negotiate a refund of at least a percentage of the deposit. New York buyers normally pay 10% of the purchase price when a contract is signed, but deposits can be as high as 25% for new construction.
Here are some examples of re-negotiated deals:
· A penthouse on East 29th Street that was in contract for $8.68 million and closed for $680,000 less on April 29, according to listing broker Mara Flash Blum of Sotheby’s International Realty.
The living room in a New York penthouse that opens onto a terrace where the seller took $680,000 off … [+]
Sotheby’s International Realty
· An Upper West Side condo in contract for $2.25million was discounted to $2.025 million, according to Friedberg, who represented the seller. He said one of the key negotiating points to giving a price cut is that the buyer must agree to close quickly—sometimes even without access to the property while the seller makes arrangements to move out.
· A condo in Long Island City was in contract for $3.9 million. The seller, represented by Claman, took $100,000 off the price to close. He was in contract to purchase a $3-million apartment in Greenwich Village, where—get this—he got $95,000 off the contract price on his deal.
· Attorney Bruce Cohen closed a condo deal in the East 80s where the seller ended up discounting $80,000 off a $1.65 million contract. In another deal, Cohen’s partner, Rob Frankel, represented a buyer who got $150,000 off a $2.19-million contract on a Park Avenue apartment.
A 3 bedroom condo in the East 80s took $80,000 off the contract to close.
Kleier Residential
· Frankel also represented a couple who signed a contract on a Central Park West apartment for $2.25 million. The couple, in their early 70s, have a home in Nantucket. Once the pandemic hit, they changed their mind and asked for the return of their $225,000 deposit. The owner gave back half. Frankel said, “They wanted to spend significant time in New York and then the world changed. Now they don’t want to spend any time in New York. All because of the virus.” (For more on people leaving New York read: Coronavirus Has New Yorkers Fleeing The City And Hunting For Second Homes)
What happens when a deal goes bust and the seller won’t negotiate and insists on keeping the entire down payment? The buyer might sue, and then the parties land in court where a judge will decide the outcome. But as of May 4, New York civil courts were not accepting new cases, and several attorneys estimated that courts might not be in full swing until the summer or later, creating a months-long backlog of litigation.
Prior to the pandemic, attorneys say that a deposit dispute would take at least two years to be decided in court. They estimate current pandemic disputes could take three to four. Friedberg said, “Are you going to spend $5,000, $10,000, $20,000 or more to get your deposit back when you don’t know how the courts are going to rule about a COVID-19 event?”
Friedberg also noted that not everyone asks for a discount. “The buyers who are happy to close are the ones with mortgages. They are more concerned about closing with a great rate and not blowing the mortgage commitment. Nowadays, mortgages aren’t easy to come by.”
When asked if there was a going rate on the COVID-19 closing discount, Friedberg said that it depended on the deal and the circumstances: “We’ve seen as little as $10,000 or $15,000 off the price, and a range of 2% to 10%.”
“It’s viral,” said Claman, referring to the rash of Covid-19 closing discounts. “You hear of one deal that got done, and then everyone wants to do it. My dad used to say you can’t play poker with 48 cards because you don’t know what’s missing from the deck. This is where we are now—playing with 48 cards.”