If you think living in New York City is stressful, try buying an apartment – it’s like stress on steroids, especially for first-time buyers. With property values steadily increasing, exorbitant rents, and a noticeable surge in new developments, perhaps it’s time to invest in a little slice of the Big Apple for yourself.
But where to start? There are countless factors to consider: location, school districts, property taxes, minimum down payments – the list is seemingly endless. It’s hard enough to settle down as a young professional, let alone navigate a cutthroat real estate market with all of its fancy insider jargon. Who really knows what ‘tabular interest rate’ is anyways? Not to worry, we scoped out a few professionals for their inside take on the top 15 things you should know before investing in your first big city digs.
Closing Costs are Real
“While people often focus on how much money they have for a down payment, they often don’t consider how much they will need to have liquid for closing costs. I like to tell my buyers that when they consider how much cash they are willing to put down, they should assume it is 21-25% of the total purchase price: 20% for the down payment and 1-5% for their closing costs. If they are buying a co-op, this liquidity might be even more depending on what the co-op requires post-closing.” -Danielle Lurie, Licensed Real Estate Salesperson at Compass
Essentially, make sure you have enough cash for both the down payment and the closing costs.
Know the Differences Between a Co-op and a Condo
“To purchase a co-op (and more frequently as of late, a condo), the board will require extensive financial back up. This can include your last three month’s bank/investment account statements, your last few pay stubs, and at least two years’ completed tax returns. You’ll want to have all of this ready before you start looking so you’re ready to go when the right property comes along. Also, [from a legal standpoint] a co-op board doesn’t have to tell you why they rejected you.” -Bill Herbst, Licensed Real Estate Salesperson at Compass
Co-op boards can be a pain in the neck, but they have incredible influence in the buying process. So decide what’s best for you and make sure all of your paperwork is in order beforehand. If you get rejected, just keep it moving.
Your Credit Rules All…But You Knew That
“If you are not paying cash…check your credit. You may think you are getting a fabulous interest rate, but one credit flaw and that’s over. Be sure your finances are in perfect order; know how much down payment you have, where it is coming from and get it transferred in ample time.” -Christine Barranca, Licensed Real Estate Salesperson at Compass
Credit and liquid cash rule the day. Make sure you have your financial life in order. Otherwise, the struggle will get even real-er.
Don’t Skimp on the Inspector
“If you are buying a townhouse or home do not be cheap on the inspection. A good inspector (within reason) can save you thousands in repairs/damages.” -Christine Barranca, Licensed Real Estate Salesperson at Compass
“There is generally not an inspection, unless you’re buying a townhouse.” -Bill Herbst, Licensed Real Salesperson at Compass
You kind of want to know if there’s a deadly mold problem lurking behind the walls, or if they’ve been slowly rotting since 1914. Pay someone to do the investigation for you, because you’re no Fox Mulder.
Be Prepared to Wait
“Until you have a fully-executed contract (meaning both sides have signed and received copies), either party can pull out without penalty. It’s generally 2-3 months from accepted offer to close under the best of circumstances.” -Bill Herbst, Licensed Real Estate Salesperson at Compass
Just like anything in life, things can change or fall through without warning. Be diligent, but remember that the contract process takes time.
Remember the “5 Year Rule”
“I advise my customers to only purchase a property if you plan on holding on to it for five years or more. While historically New York City is a great place to invest, it should be noted that we are not immune to dips in the market. Prospective purchasers need to position themselves so they are protected from a downturn–which can happen, even in New York. With a condo, if you outgrow the space you can always rent it out, but in a co-op there are subletting restrictions – so co-op buyers need to be extra careful in choosing the right apartment and building. You don’t want to be put in a position where you are forced to sell in a buyer’s market.” -Brian Morgan, Licensed Real Estate Broker, Citi Habitats
As much as New Yorkers like to hop around, buying property here should be at least a 5-year commitment. If you end up in a co-op, the chances of renting it out are slim, so make sure you really love the space.
The Importance of a Final Walk-through
“You should always do a walk-through before the close. The purpose is to make sure the apartment is in the same condition it was in when the contract was signed. It’s really not so much about looking for light switches that don’t work as for making sure a pipe hasn’t burst.” -Bill Herbst, Licensed Real Estate Salesperson at Compass
This is NYC. Anything can happen. Make sure you’re not signing your heart away on a newly-flooded condo.
Ask Questions and Look Around the Building
“Ask to meet the super, doorman, and even your neighbors. Ask about noise issues. Ask about disputes. We live in very tight quarters in NYC, so if someone is giving you a hard time, it can make or break your sanity. Also, make sure to look around the other floors/hallways of the building and even the basement. These details say a lot about how the building is run.” -Ann Cutbill Lenane, Licensed Associate Real Estate Broker, Douglas Elliman
The super or doorman can really wreck havoc on your life. Make sure they’re friendly, welcoming, and down to earth. Same goes for your neighbors.
It’s Not a Personal Thing
“Understand the board package is daunting and we brokers don’t make the rules, the co-op board does. Do NOT take anything personal, stay on course and pass the board. Heed your broker’s advice, they have the same goal as you.” -Christine Barranca, Licensed Real Estate Salesperson
The Appraisal Really Matters
“The first thing a bank will do after you sign a contract is send an appraiser to assess the market value of the property. Whatever the bank has agreed to loan you (for example, 80% of the purchase price) is what they will loan you on the appraised value of your home – so if the property appraises lower than the purchase price you will need to make up the difference in cash between what you thought the bank would lend and what it now will. If you’re putting down 20% or less, this can affect you as a buyer because you need to make sure you have enough liquid cash to cover an appraisal difference. Your agent should be able to prepare you for what the appraisal will be before you offer by running proper comps for you of recent sales like your property.” -Danielle Lurie, Licensed Real Estate Salesperson at Compass
Found something you love? Get it appraised immediately! This will determine how much cash you have to work with, and whether you can actually afford that down payment.
It’s Always the Perfect Timing
“People often worry they missed an open house or can’t get back in time to see a property, but I’ve noticed that like most great love stories, things happen in real estate when they are meant to and buyers always end up in the exact right home for themselves.” -Danielle Lurie, Licensed Real Estate Salesperson at Compass
If you missed it, it wasn’t for you. Your true love is still out there.
You Will Need An Attorney
“…and it’s crucial that you choose one who is experienced in Manhattan co-op and condo sales. Once you have an accepted offer, your attorney will perform due diligence before the contract is signed. This will include reading the building’s offering plan and amendments, last two year’s financials, and board minutes. At the same time he or she will be negotiating contract terms with the seller’s attorney.” -Bill Herbst, Licensed Real Estate Salesperson at Compass
You need someone who has your back, legally. Trust us.
Keep Your Head
“This shouldn’t be an adversarial exercise. Everyone involved (sellers, buyers, agents, loan officers, etc.) is working towards the same goal. Take a deep breath and forge ahead.” -Bill Herbst, Licensed Real Estate Salesperson at Compass.
You’re awesome. You’re a rock star. NYC doesn’t hate you, so keep your cool in the buying process – it’ll all come together.
“When it comes to renovations, know the differences in building types. A condo is real property, meaning you own the space between those walls. In a co-op, you’re buying shares; the corporation technically owns the property, and depending on the amount of work, you may get turned down by the board for renovations. Try to get at least three quotes from contractors before you begin renovations, and make sure you view their previous projects, either in-person or in photos.” -Rory Bolger, Licensed Associate Real Estate Broker, Citi Habitats
You paid for it, so it’s yours to do as you please, right? Not quite. The board also has a say in what you do behind those closed doors.
One Foot In Front of the Other
“I tell my buyers that as daunting as the real estate process might seem, it really is just a matter of staying present and putting one for before the other – tackling what’s right in front of you, rather than the whole picture all at once. Buyers in this market often get deflated – but, just like any love story, I do believe there is the right home for everyone out there. I want to encourage buyers to never settle and to keep their minds and hearts open for their dream home – it will come!” -Danielle Lurie, Licensed Real Estate Salesperson at Compass