Posts Tagged ‘house hunting’

1) Never ever go beyond your comfort zone in a bidding war. Bidding wars are emotional and may take a toll on you. You know for sure that an apartment is good if other people are interested in it. But there is no way of finding how much more other people bid. So it is best to be firm that you will not go beyond your price range. You should at least have 2 years of monthly interest and common charges in your account after the bid price. It is a depressing process, but in the long run it helps to be firm. We placed a bid for one place that I fell in love with. There was a bidding war, we lost the bid, and I was very depressed. However, a few months down the line when I got over it and the place was sold, I found out that it sold for $80K more than asking. I knew that we would have NEVER been able to meet that price. Not only that, but when I took a look at the floorplan, I saw that compared with my current place there were fewer windows and less natural light. Natural light is the number 1 factor for me, and somehow I loved that place so much that I had overlooked it. I actually felt good that my husband was firm. Having said that, if you are positive that a place is right for you, and you have to go a little above asking while still staying within your comfort zone, then go for it. But of course you have to be comfortable with the price and make sure never to regret it. I have seen a few people do that and they have not regretted it.

2) Trust your gut, if it has been right in the past. My gut has always been right in the past, and anytime I have gone against it, I have regretted. I decided to wait it out and not get impatient till my gut said that a place was right for me. That paid off!

3) Ask questions. Ask the seller’s broker as many questions as you can. Sometimes they reveal information that is helpful in the long run. Trust me, you never know what you can uncover. In one situation, a seller’s broker told us that the sellers are two sponsors who do not get along well and will accept any price for the apartment just to get out of the investment. Obviously that means we could start with an insultingly low bid, and the sellers would not be in a position to pass that up without negotiating. Too bad I hated the place so much!

4) Be smart. Obvious, isn’t it? Its your money, why wouldn’t you be smart about it? When you go to see a place, DO NOT rave about it. Play hard to get. Mention a few negative things (concerns) subtly. The seller’s broker will communicate everything to the seller. Then when you place a bid you can negotiate better. If you rave about it, the seller knows that you will accept it at any cost and may not negotiate much. Make it seem as if you know the market and have seen some places, and hence are in a good position to know the market value of the apartment. If the windows are covered, open the blinds so that you can see the view. In a few places that I saw, blinds were usually down to block out a bad view or a dark exterior. However, the apartment was so well lit that you would not really notice it. In one apartment, we unsuccessfully tried to uncover the blinds – they moved from top to bottom (a first for me). The seller’s broker ignored us. We asked her to help us and she did. Later, she tried to justify the bad view to us and other families around us. In her words, “this is the only negative thing about the apartment.” Obviously, the blinds were down to throw off the buyer. Hence, do not hesitate to ask the seller for help – you have a right to see the view.

5) Do your research. Do your research on the apartment. Be an informed buyer – that will help you make the right decision on your purchase price.

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A buyer’s broker is one that works for/with a buyer. But the buyer does not need to pay him/her – the commission comes from the seller’s pocket. The seller’s broker has to split the 6% commission with the buyer’s broker. The broker will send you listings of places, and make calls and appointments for you. He/she will also help with the paperwork involved with obtaining board approval, recommending a lawyer and mortgage broker, and move fast.
A seller’s broker works for the seller. He is the guy who holds open houses and shows you around. In my experience, the seller’s broker is very useful in providing information. They do not want to get into legal hassles, so will disclose information about the apartment that needs to be legally disclosed. Since we decided to work without a buyer’s broker, the seller’s brokers (Halstead) were extremely helpful and did our paperwork for us that would normally be done by a buyer’s broker.

How to select a buyer’s broker? Always go with a reputed company – they are more professional than smaller companies. Some reputed companies in NY are Corcoran, Brown Harris Stevens, Halstead, Elliman, and Stribling. It is very important to select one who truly believes that you will find the place that you want. In other words, if the broker thinks that you are unrealistic, he/she is not the right one for you – I speak from experience. Of course if as a customer you are truly unrealistic then it is unlikely that any broker will be able to find a place for you. But if you are just demanding, that is fine. There is a chance that the buyer’s broker will lose patience if you don’t buy a place within a few weeks. Also, the broker may tend to be insistent on your placing a bid if you like a place. It is best to go with a broker that you are comfortable with. It is also best to communicate the timeline.

Do you really need a buyer’s broker? Depends. Do you plan to check listings yourself, or are you too busy to do that? It is best to keep an eye on listings yourself because the buyer’s broker may not find all the listings for you. Our broker did not send us listings for any of the places that I ended up liking and placing a bid for. In fact, he did not even send us a listing for the one where we signed the contract. Since the seller pays the 3% commission for the buyer’s broker, you may as well go for one because it is of no additional cost to you. However, keep in mind that they can get very insistent if you do not buy a place for a few weeks and decide to wait it out.

What to do before placing a bid? The first thing to do is look for a buyer’s broker if you intend to get one. Get one from a reputed company. The next step is to get a lawyer and shop around for a mortgage. The buyer’s broker will have recommendations, but it is best to get recommendations from friends for a lawyer – our friends had a bad experience with the broker’s recommendation. Get a mortgage broker or shop around for a mortgage on your own. I don’t know the pros and cons of using a mortgage broker because we did the research on our own, and decided to go with my husband’s company bank. Get all these lined up so that when you place a bid you can move fast.

What are comparables? While placing a bid, make sure to get comparables from the broker, and your own comparables from Street Easy and/or Trulia. Comparables are sales in the same building with similar square feet, or sales in that exact area with similar square feet. For a 1200 sq ft apartment in Chelsea, you would look for recent sales in that exact location with 1000-1400 sq ft. The exact sq ft is even better. Use that price per square feet to find the market value of the apartment that you want to place a bid on. Take into account factors such as move-in condition, building amenities, etc. Better move-in condition and amenities will come at a premium. Have at least 5-10 places to compare with, and decide on a final price. NEVER place a bid for the asking price unless there is a bidding war or you think that there maybe more people interested in the place. Good places sell within the first two weeks. If the apartment has had one price cut, there is more room for negotiation if it is still in the market for a couple of weeks.

What do you need to place a bid? Download the form for financials from The Real Estate Board of NY. Fill out your assets and liabilities. Take into account car, jewelry, etc. Get a pre-qualified letter from the mortgage broker or bank for a loan if the seller has asked for it. This is NOT a guarantee that you will get a loan, but will give you an idea of the potential for one. Place the bid in writing (Word attachment to your email is fine), and explain the facts behind your pricing – something like “After going over comparables, the price per sq ft of this apartment is $$$, hence the fair market value of this apartment is $$$. We would like to place a bid of $$$”. Mention when you intend to close. All this paperwork should be given to the seller’s broker.

What to do after the bid is placed and accepted? A lot of times the contract does not go through because the bidder cannot get a loan. If the bid is accepted, get an offering plan from the seller’s broker. But before you hand over the offering plan to your lawyer, get a pre-qualified letter from the bank if you have not yet done so. That way you will not get charged by the lawyer if the bid does not go through. Once you get a pre-qualified letter for a loan, give the offering plan to your lawyer. The lawyer will read it to check whether the building financials are good. The building may have certain rules to be followed. Find out details on how many apartments are in the market, whether one sponsor owns a major part of the building and will hence probably have more clout on the board. Find out how the board is selected. Read the financials to see if the building has had problems in the past. Check to see if there maybe future financial contingencies and there may be a need to increase common charges. Finally, see if you can get a building inspection done. I used Accurate Building and they were excellent!! I highly recommend them. I had Matthew Barnett inspect the home, and he was very helpful and gave me very good information. Home inspection will tell you whether the house is in good condition, whether it requires plumbing fixtures or AC cleaning, etc. They charge a lot, but it is worth it especially because you can uncover hidden problems in the apartment that are not obvious. The lawyer will prepare a contract, and so will the seller’s broker. Read it to see that you are comfortable with the terms and conditions. If all goes well, you will have a signed contract!

Once the contract is signed… Apply for a commitment letter from the bank for a loan. Complete the paperwork for board approval. See that you have all the financials for closing. On the closing day, make sure that the apartment is in the same condition when you first saw it. Check the taps to see that there is water, etc. The buyer’s broker should do this for you. Congratulations! You have your new home!

Two informative blogs about real estate that I dig are: Urbandigs and Manhattan Loft Guy.

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Buying a apartment

I finally have a signed contract after being in the real estate market for 8 months. The market is really bad elsewhere, but not in Manhattan. Manhattan is booming as always, and sellers are quite cocky. We signed a contract without a buyer’s broker, and here is why.

A buyer’s broker is good to have if he is professional. When I started out, I went by listings on realestate.nytimes.com, little realizing that a lot of brokers post incorrect appealing pictures to get you to call them. Once you call them, it is HIGHLY likely that they do not have that place available, and will ask you what you are looking for. Then they will send you listings. This is how I started out with Homestead. The guy showed us one place that we liked a lot. I fell in love with it. I asked him for comparables, and he refused to give them to me. When he finally did, they were not really comparables. For those who are new to this, when you intend to place a bid for an apartment, always check the price per sq foot for recent (3-6 months) sales in the exact building. Check out Street Easy or Trulia for that. If there has been no recent sale in the building, look for apartments in that exact area and for the same size. Once you have the price per sq ft, use that to price the apartment. Take into account move-in condition, building type (gym, doorman, etc.) – these will have a premium. A list of similar sales in that area are comparables.

If the apartment has decreased its price in the last couple of weeks and there is still no buyer, there is more room for negotiation. The good ones will always sell within the first two weeks.

Back to my story. This broker finally sent comparables that were not really comparables – you cannot compare the price of a 1200 sq ft place with 1900 or 800. According to him, we were getting the best deal. Anyway, it went downhill from there. The guy stopped showing us more places, and kept insisting that we were getting a good deal. We decided to change brokers. We realized that if we wanted this place, we could not go with a new broker because when we went to see this place, the broker had signed an agreement with the seller’s broker that would have to be honored for 3 months. In other words, if we bought the place, the broker would get his 3% whether he helped us or not.

Anyway, another bid came in the picture and we backed out from a bidding war, and lost the place. It was depressing, because I had fallen in love with the apartment and had so many dreams about it. I was depressed for two weeks and could not get it out of my mind – much like the first time you fall in love! But life had to go on.

After that, we decided to try a Corcoran broker. He was very good and gave us a lot of information that the previous broker had omitted. He used to rent a car and drive us around. We liked the places, but not enough to place a bid on any. The ones that we did place a bid on ended up with a bidding war; we lost all the bidding wars because we were never comfortable overpaying (Indian heritage, you know!). He started getting impatient and was once a bit rude. I guess he did not want to pay any more car bills without being sure that we would buy in the near future. He also thought that we were too demanding and unrealistic, and tried to convince us that we should buy a smaller place.

We decided to wait till we had more money, and were over this broker as well because his listings were no good, and he was not smart about things. He sent anything at all our way – places that we would never ever consider! We decided to wait out the summer. In Fall, we checked out a few places and finally got one that we liked. It took us 8 long months, but we did find the right place!

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