Apple Peeled Question: Do New York City real estate negotiations ever get contentious? Are they always professional?
Espinal: They 100% can get contentious. What is most unrealized both on the sell side and the buy-side, what’s just as important as your negotiation skillset is and your level of acumen financially, equally as important is your ability to deftly manage various personalities and have a chameleon-like nature so that you can pivot when you need to dependent on who you are working with. For me, that is a more powerful skill than the negotiation itself.
Apple Peeled Question: Do you do anything differently when negotiating on the behalf of a seller compared to negotiating for a buyer?
Espinal: I don’t think the approach is different. I think tactically, the solve is different. The approach is the same in terms of the quantitative analyses that need to be done. It’s just that your pulling different levers at different points in time depending on what you’re looking to achieve.
Apple Peeled Question: How much preparation goes into a negotiation? What is happening behind the scenes in terms of information gathering and strategizing before you start talking numbers with the other side?
Espinal: depending on what the building is. What the line itself is. What kind of asset we’re talking about. Whether there are different trades or even enough trades in a given building to support the analyses that need to be rendered. Sometimes that varies. The trading narrative is so clear because there may have been 15 sales in the last 18 months. That is enough information to really home in numerically on what makes sense in terms of valuation. And then there are other buildings where there hasn’t been a trade in 3 or 4 years and the kind of asset I’m evaluating is not very comparable. That is going to present a more challenging and unique set of circumstances. I would defer to the offering plan, even prior to a negotiation to make things come to light for me that are not readily available to me publicly. I would call other owners in the building if I have access to them. I would call prior brokers who have transacted there.
With any transaction there is going to be a degree of due diligence that is going to be required by the brokers that are doing their jobs well. Some situations, like in the example I gave, will require more than others.
Apple Peeled Question: When negotiating a real estate transaction, is it just a straight-forward conversation about numbers, or is there a psychological game being played?
Espinal: It’s completely psychological, paired with heavy financial analysis. I think both are equally as important.
Understanding the whys?
Who is the owner?
Why are they selling? Not in a peculiar way that a broker usually asks. You would never go into a negotiation wanting to draw out the psychological component by saying something like, “So tell me, why is the seller selling.” I never ask that question, but I do draw from the broker by creating a natural dialogue – and that’s a friendly one, and I think it’s key to drawing information in terms of why they’re leaving. What the rationale is. What’s going to set me and my team apart from another team that is coming in with a better bid. I take all the information and I sit with it, and I craft what is a psychological entry and a numerical entry, if that makes sense.
Apple Peeled Question: Can you feel the market shift? In other words, is it tangibly noticeable when the balance of power moves from buyer to seller? Are we seeing and feeling that happen right now?
Espinal: This analogy is going to sound strange, but this is exactly how I feel.
You know when you’re so used to driving your car and you almost become one with the car? Do you know the feeling? You are driving your car, and when you shift right you feel your body moving with it and when you shift left you feel your body moving with it. You know exactly how much you have to accelerate and decelerate. You understand your car. That’s exactly how I feel about the market with the exception of the spot-on pull and push.
You can 100% feel when there’s a shift in the market. We’ve been talking about this for the last 3 weeks. There has been a dramatic shift in activity that seemingly happened overnight, but it hasn’t been overnight. It’s been that steady and gradual increase day by day, which to me is an even better indicator for the market recalibrating in some way. What that ultimately means for the next 6 months is yet to be seen, but there’s definitely a different beat to New York City right now compared to what it was a month ago.
Apple Peeled Question: During a negotiation, from the first call to the last, on average, how many total conversations do you have with your counterpart?
Espinal: Anywhere between 9 and 21.
Apple Peeled Question: Have you ever been involved in a New York City real estate transaction negotiated in two steps? i.e., Step 1: Offer submitted. Step 2: Offer accepted with all terms accepted and no counters at all
Espinal: No. I have not. I’m going to relate that back to a question asked earlier on.
The fine, fine threading of that psychological vs. qualitative, and the preparatory work that goes into doing that… I tend to believe that the best deals don’t get done in (two steps). The best deals are thought out. They do require some preparation, and I find the ones that seemingly happen overnight, unless it’s so clear and apparent that it’s good below-market value, in my view it’s come together too quickly. I think it’s the preparation and the negotiating tactics that get you to the number that ultimately makes any buyer happy. I would say the same thing on the sell side. My job on the sell side is to do the reverse.
Apple Peeled Question: Is there anything different about negotiating for a condo unit in a new development compared to a resale unit?
Espinal: It never ceases to amaze me how it’s always a surprise to a buyer when we start going through closing costs. That’s 100% the biggest difference. Most purchasers that are looking at new development don’t understand the volume of fees that are tied to the project and the price you are paying for buying in a new development. I’m not talking about New York City and State transfer taxes. I’m talking about a two month working capital contribution, a handicap charge, a resident manager unit fund that needs to be accounted for. Coupled with the traditional costs results in a number that can be somewhat shocking to someone buying in a new development. But, if we’re doing our jobs well, we’ll get most of those costs covered.