#10 First Time Buyer Help Part 2: The Cheat Sheet
The Median sales price for an apartment in Manhattan was $1.1 million in the first quarter of 2017 which is a steep number for a first time buyer. Yet there is a place for your in this city to call your own if you have an open eye in the right neighborhood and can navigate the stiff competition.
We have a cheat sheet for you to cut to the chase, find your home, and get yourself the home you WANT to live your life in.
MAKING A LIST: Too many choices can be overwhelming, its called decision fatigue. In any area of life, we all know that when we have too many options it can actually make us unhappy and stressed. When I go out to dinner and the menu reads like an dictionary, I usually just get more hungry and cannot make a choice I feel good about. This is why you make a list when you buy your home, its a big city and there are too many options to navigate them all.
Start with your wants vs needs and prioritize them. Is location more important than space? Do you need to have an elevator because maybe you are expecting a new little member of the family or do you want to have city views? Make this list of your top 5 most features and stick to it. Pick your top 2-3 areas and focus on them. Your real estate agent will keep a wider eye on the prize as they are most likely working with other clients and have a deeper pulse on the market. FOCUS is the key. Your intention usually manifests itself.
THE MAGIC NUMBER: This is probably the most important factor in your search, price. More importantly the price you can COMFORTABLY AFFORD. The whole reason you want to buy is to get out of the pricey rental market and making your home, a necessary fact of human existence, a profitable investment. Talk to a lender. Find out how much you can afford based on your debt to income ratio. Shop around, use someone who will be responsive and accountable as you may need to deal with them on a consistent basis for several months. Get a PRE APPROVAL which will give you an actual amount you can afford. This will give you an idea of your purchasing power, all internet surfing on Zillow or Streeteasy is just for fun until you get this letter. There is a difference between what you buy vs what you can afford. If you are able to spend $700K on your first home doesn't mean you should. Do you want to go on vacation? Do you think you might need extra funds to go back to Grad School? Or maybe a family member might need support in the near future. Remember to balance your housing costs with your lifestyle expenses as well.
PREPARE FOR SET BACKS: The first time buyers segment of the market, in my opinion, is the most competitive. Many people want to own in our city to get out of the sometimes insane rental market. If you are looking in the $500-$600K range, you will likely seeing multiple bids on the property if it is in good shape in a desirable area. You might get your first offer accepted, or you might have to make multiple offers before getting accepted. You should investigate the most recent comps closely with your broker. Many times sellers agents will slightly under price a listing to create more interest to get buyers to compete against each other. The list price does not matter, the market price matters. Lenders base their commitments on actual closed comps. Please remember a pre approval is a rough estimate of what you can afford based on your verified financial information, a commitment letter will be received after a bank has done the appraisal and agrees to lend for that amount on that specific home. Finally, if you are buying a coop you have the purchase application. It is an extensive application that can be more than 100 pages long based on the coop. They ask for recommendations, income verification, and dozens of other pieces of paperwork. I wouldn't be surprised if I eventually see a recommendation from your grade school teacher. This process can take a month or two and you can be asked to resubmit or declined for many reasons... and go back to square one. The message is, prepare for muphy's law.
THE TEAM: When you are buying home, you will likely have 3 people working for you. THE BROKER - As a buyer, your broker works for you and your best interests not the seller. This means they should be trying to negotiate in your favor. They will help find a suitable home, prepare your offer, advise on pricing and conditions, then get to a closing. REMINDER - Sellers pay for your broker most of the time. This means there is no cost to the buyer to have representation in the transaction. THE LENDER - Shop around to 2-3 lenders. Use someone familiar with the type of home you are looking at in the area. I always say talk to small and bigger banks, compare rates, and sometimes certain banks will cover certain costs that other do not. THE LAWYER - The attorney is very important. Use someone who specializes in NYC real estate law and has a reputation for responding in a timely manner. They are responsible for negotiating contract terms, review the buildings financial statements, and board minutes. Make sure there are no legal actions in the building or on the unit. Timing is clutch here. Make sure you are a priority for your lawyer, if they do not respond in a timely fashion they could kill your deal.
THE COSTS: Finally be prepared for some build in costs as a buyer. The coop application can have several fees associated with it. Maybe you and the seller cannot get an exact timeline and you may carry two homes for a short amount of time. If you are buying a townhouse you will need an inspection and perhaps the seller will not agree to fix everything you want before close. Often times the bank can delay closings for many reasons that are out of control of the seller or buyer. Check out my RESOURCES PAGE and click closing costs.
I hope that this entry and podcast helped you get a better understanding of where to start and what to expect when buying your first home. The take away is be prepared and be focused. The stress of uncertainty can build up over time and make the experience unpleasant. If you know what you will need to do and prepare yourself with realistic expectations, you will enjoy your first home before you even move in! Call me if you want to talk more about your first home purchase.