My wife and I have been house hunting for the last few months. Of course, when I saw house hunting, I mean co-op hunting since houses are too expensive here in NYC. When you purchase a co-op, you do not technically own the apartment, you own shares of a co-op corporation that owns the building. There is a monthly maintenance fees that covers expenses such as heat, hot water, property taxes and staff salaries.
Co-op #1
We found a place only one block away from where we currently lived that we liked. We are familiar with the area and like it, and it is in a good school district. Yes, with a baby a good school district always is an important consideration. We are looking at 2 bedroom co-ops which are approximately 900 to 1000 square feet. The co-op was listed at $321,000. We offered $300,000. The seller countered with $315,000. We came back with $305,000. The seller said they would take no less than $315,000.
I created a comparative analysis of the property to determine what a fair price would be. I went on Redfin and looked up similar properties that were sold in the area. There are a few co-ops sold in the last few years which were even in the same building complex, so that is a great comparison. I looked at what the seller paid for the co-op and took into consideration the renovations that were made. Based on that analysis, it seemed that the price was relatively fair. The co-ops in that area which were comparable ranged from $290,000 to $325,000. But, this listing was new to the market and the seller was not anxious to move, unlike other places we saw where the owner had already moved to a new home. We were in no rush to move either. Our one bedroom is getting a little tight, but we’re okay staying there for the time being. A few other reasons why I thought we had time was that it was winter and the weather hasn’t been that great. With the holidays upon us, I figured there wouldn’t be many people rushing to buy a place. So at this point, it was just a staring contest, each of us waiting for the other to blink.
Well, I was right! The seller blinked. The day before Thanksgiving, they said they were willing to drop the price to $310,000. We accepted. During the Thanksgiving weekend, not much was going on, and I didn’t expect anything to go on being that it was the holidays. But a few days into the weekday, I received a call from my realtor telling me that someone had made a higher bid: $316,000. What?! As much as it pained me, we matched that price, even though we could have had it for $315,000. The other buyer raised another $2000. We didn’t want to get into a bidding war, and didn’t come back with an even higher offer. Losing out on the property was a bit disappointing. I started questioning myself for not being more aggressive. Maybe I should have just accepted the seller’s counter-offer. Oh well, nothing we can do now.
Co-op #2
We found a co-op listed at $305,000 that we were interested in. The sellers had dropped the price from $325,000 to $315,000 to $305,000. They were desperate to sell. Apparently, they had accepted an offer, the buyer had gotten a mortgage, but the co-op board rejected this buyer. The seller already bought a house in Long Island and didn’t want to have two mortgages. We made an offer of $295,000. The sellers said that $305,000 is the lowest the co-op board would allow so they couldn’t lower the price, but offered to give us $5,000 upon closing. We agreed. The sellers asked for a plethora of financial information from us such as bank statements, credit report, etc to show that we would be able to afford the place and pass the board interview. The board there is strict, and they were already burned by the previous rejection. I don’t like giving all this private financial information out, but that is the nature of co-op boards. After a few days of looking at our financial information, the sellers rejected our offer! According to my realtor, one of the reasons was because my wife had two late payments on her credit card. Yes, my wife was not careful and paid some bills late. It was one for $17 in 2007 and one for $29 in 2011. Really? They rejected our offer just because of that? How strict is this board? Maybe we’re better off not buying it. In anycase, my wife needs to be more careful with paying her bills on time. She might need to automate her bills and use Credit Sesame to monitor her credit.
Mortgage and Real Estate Trends
While I don’t have a crystal ball, it seems like mortgage rates are trending upwards. No, I don’t think it’s a good idea to rush into a mortgage just because I think it will go up, but since we’re ready to buy, I do feel a sense of urgency. I don’t think there is anything wrong with renting, but I think buying will work out better as we’re planning on staying for a while. Another reason is that I have a feeling that the housing market is trending upwards in my area also. Manhattan real estate is expensive, and this has spread to Brooklyn which has a really hot real estate market. I have a feeling that those who are priced out will be looking into Queens pushing the prices up here too.
Does any one have house hunting and negotiation tips? Should I have been more aggressive and accepted the seller’s counter-offer?
I’d like to thank K.K from Student Loan Survivor and Everybody Loves Your Money for sharing my post Shamed For My Frugality.
Exciting stuff!
I would say to always run your numbers and never be afraid to walk away. There is ALWAYS something new and better that comes a long. Don’t let emotion get the best of you!
Sam
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Yes, I’ve been telling myself that but there are many 2 bedrooms in the area. There are, however, many what they call “Junior 4s” available, which is a one bedroom with a separate dining room converted into a room. Not ideal for a family with young children as the 2nd “bedroom” is not that close to the master bedroom. It would be much easier to walk away if I was buying a car…there’s always another dealership available with the same exact car.
It is amazing that you are in a position where you aren’t crunched for time. You have the ability to wait on the perfect place for the perfect price. And I bet when it is all said and done, you will look back on these two options and be happy that you didn’t pay more than you wanted or became subject to the crazy rules that I’m sure Co-op #2 had in store for you!
Dave @ The New York Budget recently posted…Anatomy of a Chore: How to Motivate Yourself
When I renewed my lease, I asked for a rider to the lease which allows me to terminate it with 2 months written notice. Make sure to do that, because you don’t want to have an issue with moving out. I’m not crunched for time, but I still feel some urgency since the mortgage rates are trending up as are the prices in the area…at least that’s what I think.
That’s great that you’re doing the research upfront to find the best property. I remember when we bought our house, we must’ve looked at over 40, 50 houses before we settled and put an offer. We were able to get the buyer’s price down $9k below asking, but even more than that, I think it taught us about what we really wanted in a house. Mind you, there are many things we overlooked now, that we’re looking for in our next home, but take your time and make the ‘best’ decision for you and your family.
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Wow, you guys looked at a lot of places. I think we have a good idea what we’re looking for. I guess with a house, you don’t have to have a perfect place because you can always make changes. A little more difficult with a co-op where you need approval to make renovations. Plus, you can’t expand like you can with a house.
House hunting and selling has so many ups and downs. Honestly, co-op #2 sounds a little insane. Two late payments and not even recent? They’re going to have a tough time finding anyone. It stinks that you were outbid on the first one but I think it’s better to sick to your budget. I hope a good listing shows up soon!
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Thanks! I was thinking that they’d have a tough time finding someone, but the place is listed “under market value” according to them…and I think it’s true so they do have another buyer.
Wow that sounds like an intense co-op board! I think the good thing is that you are okay where you are now and even though it’d be nice to move, it’s not urgent. Good luck in the hunt!
Thanks Cat! Yea, it’s not urgent though part of me is scared that mortgage rates and real estate prices will be going up.
Wow, that’s insane. I never knew co-op boards could be so strict. It’s great that you have flexibility as to when you want to move. I’m in the process of looking for a place too so I feel your pain! š Hang in there, you’ll find something!
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I know right…this isn’t Manhattan! Good luck with your condo hunt…at least you probably won’t have to deal with co-op boards.
I love negotiations but have only purchased one home, so I can’t give much specific advice. I love how you handled the first negotiation. He with the longer timeline usually wins. Getting information about the other seller (especially any pressures, like timeline, that they may be feeling) is one of the best things you or your agent can do.
I don’t know how co-ops work, but I am surprised that in scenario #1 the seller could accept new offers after they had accepted yours. But like Sam said, it’s fine to walk away because there really will be other homes, probably ones that present better value or that you simply like more.
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Thanks…but I didn’t win in the end which is disappointing. I think the longer timeline works better when the product can be bought elsewhere. I think it’s a little different when it’s a house. I do see your point though. Apparently they “accepted” our offer but no contract was signed so they can back out.
I agree with Fin Sam – don’t be afraid to walk away. We gave up too much the last time we bought because we were convinced something better wouldn’t come along. Bad mistake on our part. Hang in there, Andrew – the perfect place for you guys will come along. š
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Thanks Laurie. That’s exactly what I’m starting to feel…that something better won’t come along…and won’t come along for a while.
That’s ridiculous for the board to deny just because of two late payments from way back… I think you’re better off if that’s any indication. I wouldn’t have done a bidding war, either, I agree that something else better will be out there.
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Actually, the crazy thing is that we didn’t even get to the board interview. The seller was scared that we wouldn’t pass the board interview so they didn’t accept our offer!
Andrew,
The minute a counter offer is sent to you that you accept you should sign it immediately. It sounds like the other agent shopped your offer around. When I offer on a property I place a 24 hour expiration so that the other agent doesn’t leverage my deal. If you’re using you aunt she should:
1. Place a 24 hour timeline to accept, no more than 48. Once accepted you should sign right away. In most states you have a 3 day right to cancel. In Hawaii it’s 10 days up to the home inspection.
2. I agree there is always something better. You should have a prequalification letter (different than preapproved) enclosed with all offer and a written letter explaining how you and your wife love the place and will make it a family home. It humanizes you and gives you an edge.
3. If you agent doesn’t know the difference between prequal and preapproved and doesn’t know about the right to cancel clause in real estate transactions you should get rid of them, family or not.
I will accept a beer for this advice.
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Thanks for the advice. I don’t think the agent shopped my offer because it was the seller who came back to us with the reduced selling price as I wouldn’t meet their price. So basically, they made the reduced offer and we accepted. Here in New York, I think the verbal acceptance is not binding until you actually sign the contract. We never received the contract from the seller. There probably was some delay being that it was the holidays. We have a prequalification letter and we presented that among some other info to the seller’s agent. We also met the seller and the family when we toured the place, they seemed to like us as we were around the same age, both had a son, and we live in the area, etc. I got the impression that they liked us. But money talks!
I second what Sam said about always being willing to walk away. I probably jumped a little too quickly on our house, but I was also feeling a slight sense of urgency. I think you’re right about the prices going up in Brooklyn and Queens. Same thing happens in city/suburbs here where people go further and further out and the prices rise in those first and second-ring suburbs.
DC @ Young Adult Money recently posted…Why Young Adults Should NOT Choose Catastrophic Health Insurance Plans
Yea, that’s why I feel the sense of urgency…with prices possibly headed up and mortgage rates headed up…I don’t want to miss out on the opportunity.
Holy cow I can’t believe they rejected you for just that!!! Hopefully this just means a better place is waiting for you. Sounds like kind of a stressful process!
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Yea, I was pretty shocked too. I’m hoping a better place is waiting for us too!
Sorry that the two co-op offers fell through. Buying a house can be very trying, and very expensive. I hope you find a nice place that has a motivated seller next time.
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Thanks Bryce!
Having done 6 real estate transactions in the last 5 years all I can say is don’t let emotion get the best of you, but be realistic about your situation. Let’s face it, you want to buy a place. And people with their house on the market want to sell it. Don’t let a couple thousand dollars ruin the deal. If you liked the place, I would have written an offer with 24 hours to respond meeting in the middle and told my realtor to talk to the sellers agent and explain $305k was your top dollar, but you are cashing out some investments to get to $310k. Assuming the sellers have a good agent, it would have been a done deal long ago. I don’t like the “meet in the middle” tactic, but here it seemed appropriate.
Also, in most states it is incredibly easy for the buyers to back out. Especially up to the due diligence deadline. While it’s taboo amongst realtors, there is nothing wrong with getting a place under contract and then backing out at inspection if you get cold feet. The worse that can happen is you’re out the cost of the inspection.
I never forget after wading through comps […..] I am the market and what I am reasonably willing to pay is the market price.
Hope you find a place!
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Thanks for the advice. It’s tough to keep emotions out of this type of transaction when it’s a primary residence. 6 real estate transactions in 5 years…are you a real estate mogul?! I kind of feel like I let a couple thousand dollars ruin the deal…the sellers didn’t want to meet in the middle at that point. When they did, we agreed but another buyer swooped in and took it. I might use your suggestion next time about saying that it was my top dollar but would cash out investments to get to $310k though $305k to $310k doesn’t change much with the down payment. I’m not sure how easy it is to back out at inspection for co-ops as there isn’t much to inspect versus buying a house.
Can’t believe that those two late payments would cut you out of the running. At least, you aren’t in a rush and have time to find the perfect place for the best price!
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Yea, at least that’s what they told us. I mean I do also have student loans, but I think we definitely presented a good financial picture.
Sounds like a couple of frustrating experiences. Sorry buddy! I do think you’re correct in being patient though. It’s going to cause some short-term pain (already has obviously) but in the long-term it should lead to something that you’re happier with. Good luck!
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Yes, it’s definitely been frustrating. My wife was even more disappointed when the deals fell through. I try to tell myself that patience will pay off, but it seemed like my patience worked against me. Thanks!
Yes Co-ops in the northeast are mostly all very strict. Would you consider a condo instead in Queens? I think you have more flexibility to do things, and its easier to get out when its time to sell.
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Unfortunately, there aren’t too many condos in the neighborhood I’m looking in. And the condos I do see are north of $400k!
I can’t imagine buying a place in/near NYC. In addition to cost, I don’t really know that I’m ready to commit to spending the rest of my life here.
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Yea, definitely shouldn’t buy if you’re not committed to staying here for the long term.
As much as we try not to be emotional when it comes to the house buying process, the whole process is really emotional (for me at least). Yes, I recognize there are houses on every block, but when you start to imagine yourself living in the home and celebrating milestones in the home it does get really emotional. I’m sorry things haven’t worked out for you yet. They will!
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I think my wife was doing that…as was I to a certain extent. We imagine ourselves living there, where we would put the furniture, etc and it was disappointing when it fell through. It’s hard not to be at least a little emotional when you’re purchasing a house.
I’ve heard about the strictness of these uptight co-ops. Take comfort in the fact that you probably wouldn’t like to live among them either, but l am sure it is quite dissapointment. When you finally find the right one, you’ll see it was meant to be and you’ll be glad about the ones that fell through. Hang in there.
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Good point! I think I dodged a bullet there because the board sounds pretty crazy.
I guess it’s good you didn’t get the second place. If you ever needed to sell, you’d have to go through the same thing with the board. I’m sure the right place will come along.
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You’re right, I was thinking that too…definitely would be tough to sell if I have to deal with that board.
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House hunting is definitely stressful and exciting at the same time! But take your time and don’t rush it. You’ll know when you find the right home! That’s how it worked for us!
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Thanks! Glad that it worked out for you guys. I’m hoping for the same.
You might be able to give yourself an advantage by finding a cheaper realtor or just using a real estate attorney. That allows you to save on the purchase price without affecting the seller’s position. Or if you’re not in a hurry, get your realtor license and just do it yourself. But the bottom line is the more places you look at and the more offers you throw out there, the savvier you’ll get and you’ll know exactly what it’ll take to get what you want. Hang in there!
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My aunt is my realtor…I would have been fine not using a realtor, though I’m not sure it would have changed the price unless the seller’s agent would be willing to give up a portion of the commission. I’ve consider getting a realtor’s license and doing it myself, but I don’t know how that would fly. I’d like to learn more about that at some point.
Good luck! One of the most frustrating things I’ve done in a long time was find an apartment in NYC. I am NEVER moving. Well, maybe not never, but never in the city. Hopefully my rent stays pretty close to where it is for the next few years.
I can’t even imagine trying to buy here. And I definitely think you’re better off avoiding a co-op board that went nuts over less than $50. Madness.
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Unfortunately, it seems that the rent continues to increase every year…just lucky that it isn’t a significant increase. Crazy thing is that it never got to the co-op board, the seller was just worried that the board would be nitpick about that. That in itself is worrisome!
Some great advice in the comments here.. No doubt, you need to be able to walk away from any property if you can’t get the deal you are looking for.
My additional advice would be to place a premium on the neighborhood where the home is located. Having neighbors that you can get along with really does wonders to improve your quality of life.
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Yes, I love the comments…I learn a lot! Location Location Location…the neighborhood and its neighbors are definitely #1 when choosing where to live.
I remember looking at a coop in West New York, next to Weehawken, large two bedroom in a luxury high rise for just under 200k but the maintenance fees were $1100 a month, meanwhile I was only paying $550 for rent right across the street.
Stefanie @ thebrokeandbeautifullife recently posted…The Danger of Doing What You Love
Wow your rent back then was half the maintenance fee! The maintenance fees in the neighborhood I’m looking at range from $800 to over $1000 for a 2 bedroom. So pretty high too.
It is very true. The emergency fund is so important, but even more so when you are a homeowner.
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Very true. Lower rates encourage riskier investments, which benefits those who know how those investments work.
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I am a firm believer of good things will come to those who wait. You made the right decision on turning down the first purchase. The second offer was quite good but then things got in the way. I am from Long Island as well and I know very well how expensive it is to live out here. I and my wife are planning to save some money here and run to another state to finally purchase a home. I don’t know if a home investment here in NY is worth it in the current economic situations.
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Thanks for the encouragement! What state do you plan on moving to? Yes, we’ve considered living this high cost of living area but since most of our family and friends are here, it is very difficult to do that.
Hey, you are very welcome. We are planning on moving to Texas, Houston area mainly because living costs are better, house prices are better and we can find work out there as the unemployment rates are also lower. I know it is a tough decision to move away from family, it is for us as well. We are trying to see if one of us can make the move first and find some ground before we relocate.
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Good luck on the move. I keep hearing that Texas has a lot of opportunities and that the housing is very affordable. Kinda hot there though! But I’m not sure I mind hot after this winter we had in NY.
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