It's safe to say that a home — especially in New York City — will be one of the biggest purchases you'll ever make in a lifetime. But let's be real here: Buying can be crazy expensive, and the paperwork and process can get labyrinth-level confusing.
Still, owning a home is possible, even for young buyers, and even in expensive areas. "Most of our twentysomething clients have 'buying a home' as a six-year goal," Stash Wealth founder Priya Malani, Refinery29's financial expert, says. But if you have a solid credit score and a decent amount saved up and can do a little bit of planning, owning an apartment might move from "pipe dream" territory to "next year" territory.
So how to begin? We have a guide right here to get started, but step one involves knowing how much money to expect to spend: "[Buyers usually] put down 20% to 30% of the total cost at the very beginning, so you want to be prepared," says Alyssa Soto Brody, a Compass licensed real estate salesperson.
Think that's a bit too much? There are exceptions. Malani mentions that other lending options like an FHA loan (which requires that you pay insurance on your mortgage) could allow you to use lender funds for closing costs, reducing your initial payment to as low as 5%. "As long as the monthly payment remains a doable amount for you, a smaller down payment might allow you to stop renting and start investing equity in your own home sooner," Malani says.
Once you figure out the financial side, however, a plethora of other questions start popping up. How long will it really take? How do I know I'm getting a good deal? What should I watch out for?
So we decided to find out what you really need to know about buying in or around New York City, asking for advice from Malani, Brody, and homeowners — people who survived the process. Ahead, 10 major pieces of advice for anyone even thinking of buying in the NYC market. Who knows? A key to a place you call yours could be in your future.
Be Prepared To Move Fast
Real estate can be competitive — crazy competitive. "If you see something you like, you'd better be ready to act FAST, and I mean cat-like-speed-and-reflexes fast," Elettra, a 33-year-old homeowner in Manhattan, says.
Before you head to an open house, take a good look at your bank accounts and get all your paperwork ready to go. If you're getting help with financing, make sure to get a mortgage pre-approval, so you know what you qualify for. Requirements vary based on your lender, but bank on having to provide your income via tax forms, bank-account statements, and other asset statements including stocks, bonds, and other real estate holdings. Then have your attorney's information on hand (more on that in the next slide).
Finally, Brody recommends that NYC shoppers fill out the Real Estate Board of New York financial form, which lists your assets and your liabilities. Some brokers are going to ask for it when you submit anyway, so it's good to be ahead of the game.
Get Good People On Your Side
There are three people you need for your home-buying team: your real estate broker, your attorney, and your mortgage broker.
Of course, the big question is, do you even need a Realtor? For first-time buyers, it's the safest bet. Having someone to guide you is invaluable — and for you, doesn't really add any extra cost since sellers pay their commission. "One major regret I had was that I didn't get a Realtor to represent me," Mona, a 27-year-old homeowner in Queens, New York, says. "Because I pretty much represented myself, I consulted a lot with my lawyer, who then billed for those hours. It got expensive!"
So how do you find a good Realtor? "The best way to go about it is to ask some friends," Brody says. "Ask friends, coworkers who they've used, who they've liked. If you can find a broker who is reputable, they can help you assemble the other pieces of your team."
While your mortgage-broker choices might be limited based on which bank you typically use, a good lawyer is key to making sure you're protected every step of the way. "You're going to want an attorney who specializes in real estate in your market," Brody says. "They're going to move fast, understand the pace, and understand the material."
If you're not getting references, or you want to check out the market on your own, Brody suggests heading to open houses and meeting brokers there. And don't worry if you're not feeling it, even after a few meetings. Just like any relationship, you can definitely break up with your broker.
"This is probably the biggest purchase you’re ever going to make in your life," Brody says. "You should feel comfortable with the person who is assisting you with this. It’s like dating someone. Feel the water, test the market. There are a lot of brokers out there."
Decide Between Co-Op & Condo
The differences between a co-op and a condo are many. A co-op is essentially a business; when you "buy" an apartment in a co-op building, you're buying a stake of the business, and in return you receive a lease for the apartment. A condo is much more straightforward — you're buying the property.
Of course, there are pros and cons to both, and each building is a little different. But there are a few generalizations that can be made.
Typically, a co-op is going to be more strict, Brody says, not just in terms of building policies, but also where they want to see your money coming from (i.e. how liquid your money is). They might ask for more paper trails or a larger down payment, but typically "your closing costs tend to be a little less expensive when you're closing on a co-op," Brody says. "In a condo, you're going to have mortgage recording taxes, and that doesn't happen with co-ops."
Then there's the approval process, which can vary based on how large the building is. Condos can't technically reject an applicant, but the association can offer to step in and buy the condo. Co-ops, on the other hand, can reject an applicant based on any application materials and information provided.
Still, some condominium buildings in New York are becoming as strict as co-ops, while other co-ops are surprisingly laid-back. It depends on the building. "Everyone tells us how these board interviews are crazy, but for ours, they couldn't have been nicer," says Caitlin, 31, who owns an apartment in Manhattan. "But our building is super small; it is only 10 apartments in a five-floor walkup."
You're Looking For A Dream Home — & An Investment
Unless you're in the business of buying and flipping, chances are the home you buy will end up being yours for many years. This means you'll have to decide what you can live with — and can't live with.
"I honestly wish I had looked at [my purchase] more from a 'dream home' perspective," says Kerry, 40, in Fairfield, CT. "Our house is great and we have customized it and renovated like crazy, but I still wish it were closer to town and the beach where we live."
When you start your search, Brody recommends making a checklist of features that are important to you: location, light and air, where your windows face, laundry in unit or in building. If you might want a pet, keep that in mind when looking for pet-friendly apartments. If you plan on having a family, consider schools within the region you're buying.
Then rate them. "In New York City, you're going to have to make compromises, but if you understand what's really important to you, you can go into your search prepared," Brody says.
Keep in mind your priorities could change as you see what's available, but understanding what you're looking for going in will save time. And, of course, if you don't get everything you want, there is always next time.
"Buying your first home, if done strategically, can totally lead to your dream home," Malani says. "Even if your first home isn't perfect, you may not want to invest in 101 modifications, because you won't always see a return on your investment. Trust your broker to help you decide which modifications will add real appreciation to your home's value."
Never Compromise
Remember that list of priorities? Mark which ones are non-negotiables and try not to compromise on those. "I like to say, never compromise but keep an open mind," Brody says.
This essentially means don't let the market scare you into giving up on those asks. You should never put down a bid on a place only because you're scared to lose out to someone else, because there will be another apartment that checks all your boxes.
"We looked at a place that was a duplex that wasn't big enough and needed major renovations, but I fell in love with this terrace that it had," Manhattan homeowner Ali, 31, says. "We ended up retracting an offer after it had some water damage that wasn't disclosed, but we shouldn't have been attempting to buy it in the first place. I was just so blind to the idea that we would find something else as good."
Still, if a place matches your requirements list, especially the non-negotiable features, act fast. "The truth is, an offer is an offer; you’re not signing a contract," Brody says. "I definitely wouldn’t lose out on a property by waiting too long." And if your offer is accepted and there are a few tweaks you'd like made, negotiate your contract.
"I wish we were tougher on the negotiation," says Caitlin. "We only saw the apartment once and put in a very high bid, but I wish we had asked them to fix the fans, fix the floors, put a dishwasher in. But we didn't, because we were so scared to lose something." A good broker, however, should be able to negotiate for you. Use that.
Don't Get Discouraged
It might seem like the right home will never show up. Or when it does, something always falls through. But here's the truth: There will always be another.
"We 'lost' two apartments in our search, one because we pulled the offer based on the inspection and the other because another buyer came in with all cash a day before we signed a contract," Ali says. "I was pretty devastated both times because I had started to imagine my life in these homes. But those apartments were not as good as the apartment we ended up buying."
Yes, there are a ton of buyers out there, so there will be competition — and there will be apartments that don't work out. But "there is 100% another apartment out there," Brody says. One of her clients, she says, had a bid accepted, only to lose the apartment to a higher offer. "Fast-forward a year, we are buying an apartment in the same building with a much better view at a much better price," she says.
So while you might expect an accepted offer to be a done deal, don't celebrate too early. "You can't even get excited until the ink is dry," Brody says.
This is a good thing, though, because...
...You Shouldn't Be Afraid To Back Out
Since it's not a done deal until the contract is signed, take the time from offer to closing day to really do your homework.
This means your lawyer should be looking into any issues with the building, and you should get the home inspected.
"A lot of people at first say, 'Inspections are so annoying.' But you know what? Get one," Brody says. "It's going to avoid so many issues at the closing table."
An inspection, which makes sure all the appliances and plumbing work, is the safest way to make sure you're not getting swindled. Ali pulled out of an apartment after an inspection revealed water damage — which would have taken extra money to repair.
Your lawyer, in the meantime, should be looking into the history of the building and how it's doing financially. "The attorneys I work with have a 35-point questionnaire," Brody says. "They're going to go into board minutes, see if renovations are coming up, see if they're thinking of doing anything. So even before you sign the contract, you should have an idea of what could happen in the future, like maintenance increases."
The best part? If you don't feel comfortable with any of those things, you're free to walk away.
Expect Delays
While the bid process moves fast, everything else is at the mercy of other parties. In general, Brody suggests giving yourself 60 to 90 days to close — 90 days being the maximum because that's typically how long your mortgage rate is locked in for. "It can be done in less or more time," Brody says, mentioning a client who took upwards of a year to find a place and sign the contract.
Co-op approvals, if you are applying for one, can also cause delays, especially in the summer when everyone is traveling. Even worse? "Construction delays are inevitable," Brody says. "When they say fall 2018, be prepared for spring 2019."
It's important for sellers and buyers to be transparent about what they need — especially if sellers are going to be in between apartments. "I've seen a lot of instances where a seller is buying another place, and they have to close on yours first so they can take the cash and buy the other one," Brody says. "Those never seem to work out." Ask from the start what the seller's timeline is, and make sure these cases are discussed and included in the contract.
Don't Let Anyone Pressure You
At the end of the day, everyone has the same goal — get a buyer a place that he or she will be happy with, at a price both parties agree to. This means that you are the customer, and if you're not comfortable with something, let that be known. "I felt pressure from our Realtor because she had shown us a lot of homes, and we were getting to the end of the inventory, and she pushed on us to make a choice," Kerry says — which resulted in her buying a not-so-perfect home.
This is why getting the right person to represent you is important. "I overheard a conversation in my office the other day, where a colleague straight up told his client, 'You know, you're really hesitant and there are so many things you don't like, maybe we should keep looking,'" Brody says. "I was so proud to be this person’s colleague. That’s a good broker, someone who will say, 'I don’t think this is a good fit for you.' Because we want to be your broker for the rest of your purchases, too."
Ask Questions
If you assemble a good team, all your questions should be answered without you even asking. Still, it's good to head into the process prepared and think about what you want to know beforehand. Do you care if bedbugs have been found in the building in the last five years? Do you want to know the tax history of the building? Have there been complaints of odor? A mouse problem?
Some of these potential problems could be deal-breakers for you. Sometimes they're simply good-to-know facts to help you in your decision-making process. Brody outlines three major questions every buyer should ask before signing a contract:
1. Are there capital improvements that are in the works that could cause an assessment or cost extra money? "As a first-time buyer, you have a specific budget, and these assessments are never small and can add on to a monthly fee," she says.
2. What is the rental policy? "You never know where your life is going to take you," Brody says.
3. What are the average monthly costs, including the electric bill, from the past owner? "Thirteen-foot ceilings might mean a higher electricity bill, versus nine-foot ceilings," Brody says.
Ultimately, asking questions not only informs your decision, but it lets you know what sort of money you'll be spending if the deal goes through. And as any New Yorker knows, every dollar counts.
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