In his hit song, New York, New York, Frank Sinatra sings “If you can make it there, you can make it anywhere.” This is true of everything in New York City, but especially of the real estate market. Purchasing any type of real estate, whether it is a condo, house or investment property isn’t a simple process in any location during any economic climate. A home is the most expensive purchase most people make. Buying real estate isn’t like buying a piece of jewelry, like an engagement ring, or even a fancy sports car. Whether you are looking for a new home for your family to move into or as an investment to rent out, it isn’t a fast, easy process ever. The New York Real Estate market is one of the most difficult markets to understand and practically has its own language. These secrets should translate some of the language for you.
One secret to keep in mind while reading the others, is that there are exceptions to every rule. However, exceptions are few and far between. Yes, there are people who find jaw dropping deals, or don’t have to turn in a board package because the president of the board is on vacation in France, or find the most perfect unobstructed view of Central Park for a song. If you search with a good understanding of the market and your budget as well as a realistic expectation of the amount of time the transaction will take to close, you too can own a piece of the greatest city in the world.
10. While Condominiums Are The Fastest Growing Market: NYC Is Mostly Co-Ops
In the 2000’s, hundreds of brand new construction condo buildings were built. However, the majority of apartments for sale in New York City are Co-ops. While a co-op apartment doesn’t “feel” any different from a condo, the purchasing process is entirely different and always more difficult. To break it down: condos are considered “real property.” You write a check for a down payment, you sign a contract and you close. Closing a co-op, which is explained below is an entirely different process. First of all, co-ops are shares in a corporation that owns the building. All co-ops have their own unique rules and requirements for buying, selling and subletting. In today’s market, rental buildings are no longer converted into co-ops because the market gravitates towards condos. Furthermore, new developments are always built as condos.
9. In New York, The Only Thing More Stressful Than Getting a Cab During Rush Hour Is Purchasing a Co-Op
Co-ops are governed by an elected board of residents who, among other things, determine requirements for sellers and purchasers in the building. Every co-op has its own very specific criteria to approve purchases. For example, they will require a certain minimum down payment. Co-ops may also require you have a certain amount of cash in the bank leftover from the purchase after you close. After a contract is signed between the seller and purchaser, a board package is submitted for review before the sale can close. A board package generally includes financial statements, background check, credit check, employer and personal information, as well as reference letters. There will almost always be an interview, which any good agent will prepare you for.
8. Co-Op Boards Are Part Of The Reason Why NYC Has Low Foreclosure Rates
While most of the country has been devastated by high foreclose rates, the New York City market hasn’t seriously been affected by this trend. Co-op boards are a large part of the reason New York City has a low foreclosure rate. If someone wants to buy an apartment in a building they can’t afford, if the building is a co-op, they won’t be allowed to. Co-op boards also approve renovations such as new lobbies and hallways, as well as adding amenities like gyms, which help maintain the price of apartments of individual units by making the building more desirable.
7. There Is One Way To Buy A Co-Op Without Board Approval
While there isn’t a large supply, sponsor apartments do exist. A sponsor apartment is owned by the original investor or owner in the building. Many rental buildings in New York “went co-op” in the 80’s and 90’s, meaning existing rental buildings were converted into co-ops. Residents were given the option to continue renting or to buy their current unit. When the apartments that remained rental units become vacant, the sponsor can sell them without board approval. Most of the time, sponsors renovate the units before they hit the market, so they are ready to move in. Keep in mind, that when the sponsor unit is transferred to a resident, they still have to abide by board rules when they are ready to sell.
6. Co-Ops Aren’t Investor Friendly
While investor friendly co-ops exist, they are very few and far between. If you are buying an apartment only as an investment, don’t even try it in a co-op. Boards can place any restriction they want on subletting. For example, you may only be allowed to sublet after two years of residency, for a maximum of two years at a time. However, boards understand that sometimes subletting is necessary and will be reasonable. Lets say you get a job opportunity in another state, but aren’t ready to sell you apartment yet, a reasonable board should allow you to sublet your place. However, renters may also be required to submit a board package and possibly be interviewed.
5. Don’t Try This Alone, Find A Real Estate Agent
The internet isn’t a substitute for firsthand knowledge and experience in any field. Understanding the New York market isn’t about what you know, it’s about what you don’t know. The internet won’t tell you if a building has bad management, mostly dark apartments, is poorly staffed or has a difficult board. Real Estate agents will navigate you through the buying process from start to finish for free. Their services are paid for by the seller. While their goal is to sell you an apartment, their knowledge of the market is better than yours because it is their job. They have a knowledge of what is out there and will guide you through a very daunting process, especially when navigating co-ops.
4. All Real Estate Agents Have Access To The Same Listings
If you don’t have a personal referral for an agent, look for one at open houses. Finding an agent is like dating. Your agent should be someone you can see yourself spending time with who understands your needs. All agents get 99% of their listings from the same central database that isn’t accessible to the general public. Those listings have more information than is available to the consumer online. Agents may also have access to secret listings or may be aware of listings before they are released to the public. A good agent won’t show you a hundred listings or waste your time. He or she might show you a place or two that is slightly outside of your criteria, but be reasonable, you can’t buy a three bedroom condo in Soho for $500,000.
3. Work With Only One Agent
Before you commit, it’s okay to communicate with and look at properties with more than one agent. However, it’s proper etiquette that after you have decided who you want to work with, to stick with that person. It’s a small world, so the agents will always find out the truth. However, much like dating, if you go out a few times and you feel it’s not working anymore, it’s okay to break it off with that agent and go out with a new one. However, you need to tell your new agent what you have seen already, so they won’t show it to you again.
2. Listen To Your Agent
Take the suggestions your agent makes seriously. No matter how experienced you think you might be, they always know more than you do. This is especially true when establishing a team to close your transaction. Using the right mortgage broker and attorney is key. A good agent will always have someone specific they work with. FYI: Federal law prohibits agents from receiving kickbacks, so their suggestion isn’t going to personally be financially beneficial. If your agent suggests working with someone who they know will prioritize the sale and not cause a snafu in the process, work with that person. However, if you have someone you know and trust or have previously worked with, then work with that person instead.
1. If You Can Afford To Do So, Buy, Don’t Rent
In 2013, it was 26% cheaper to buy than rent in New York. So, while buying an apartment is an exhaustive endeavor, renting isn’t a walk in the park either. If you can afford a down payment, it makes much more sense to buy than to rent. The wild fluctuations in the market the rest of the country has experienced in recent years isn’t applicable to New York. Between December 2013 and January 2014, the cost of renting increased by 2.07%. The rental market isn’t going to decrease significantly anytime soon. So, if you can buy, but you chose to rent, you are simply throwing away your money.