Buying Real Estate in NYC - Some Things You Should Know

Danger, Will Robinson, Danger! Beware, Big Apple home-buyers. There are some things you’ll want to know if you plan on buying real estate in a New York City borough. It’s ugly out there, and I’m here to tell you why.

The first thing to know is that it takes a minimum of two to three months to close on a property purchase in the City. So I recommend you start your search at least four months out.

When you buy an apartment in New York, you’ll be buying either a co-op or a condo. Buying a co-op is not like buying a house. You’re buying shares in the building – not the unit itself. The building is run by a board of directors, and before you can close on the property, you need to get board approval. This requires filling out an application and supplying four to five personal reference letters. In addition, even though you’ve already been pre-approved by your mortgage lender, you’ll need to supply the board with a credit report, and everything there is to know about your personal finances. After you’ve supplied them with all this information, be prepared to wait. And wait. Most boards only meet once a month, so it can take weeks for board approval. Keep this in mind when you get a rate lock from your mortgage lender because you’ll find that you can’t possibly close before your 70-day rate lock expires. The board is under no obligation to honor any closing date that you set with your lender and the seller. Furthermore, they probably don't care.

Most co-ops also require that you put 20% down. Some require more. And with Manhattan prices starting around $900/square foot, a 20% down payment can be a pretty penny. Even in Brooklyn prices start at over $500/square foot. Not to mention, earnest money is 10% of the sales price. Ten percent! I've never put more than $5 grand down in earnest for a home.

Besides all that, house-hunting isn’t easy in New York. Get this - there is no MLS here, at least not in Brooklyn or Manhattan. (Staten Island appears to have one.) Without a multiple listing service, you don’t have a single place that you, or your broker, can find a comprehensive list of all available properties. The only way you know you’re covered is by spending hours doing your own searching – on nytimes.com, craigslist.org, and individual broker sites. I don’t know how people ever bought property here before the Internet.

And then there’s the attending open houses. Your broker will usually send you off to do that on your own. Be prepared to do a lot of walking – and running. Why run? Because open houses typically only last 1.5 - 2 hours. That’s not enough time to see 10 different homes in one day, especially if they are in different parts of the city. Plan to run all over the place and from one subway to the next to get to all the open houses on your list.

And some brokers are so snotty that they won’t let you come to their “open” house without an appointment. There was one open house in Park Slope in Brooklyn that I tried to get an appointment to, but the broker never answered his phone, so I just showed up. When I showed up and signed in, indicating that I’m working with another agent, he told me he doesn’t “co-broke.” Meaning he won’t share his commission if another realtor brings in the buyer. Unbelievable. This is something I've never seen anywhere else. How greedy can these people get? I told this guy I was interested in the place (and I was), but not if he wouldn’t co-broke. He complained about me attending his "open" house without an appointment. This guy was so unbelievably rude that I finally just walked out suggesting, “Maybe you should call it a closed house.”

Actually, it was a fourth-floor walkup, so I probably didn't want it anyway.

So the lack of co-brokering by several agencies and no MLS means it’s everyone out for himself here – unless you (as buyer) choose to pay the realtor commission at closing. And it’s cut-throat, let me tell you. I’ve never seen such a crappy real estate system in my life. It locks the buyer out of looking at many of the properties for sale, unless you are willing to work with dozens of different brokers, who will each vie for your loyalty.

Beware of ads that are filed by third-party brokers. These are guys who steal other ads and advertise them under their own names. It's perfectly legal, and it's their way of trying to grab half the commission on the sale. If you respond to one of these guys, you are cutting your own broker out of the picture. I've seen this a lot on craigslist and missed out on a property because of it. So be sure to ask up front if you're dealing with the owner, the listing agent, or a third-party.

Another strange thing is that there’s no escrow company handling the closing. Both the buyer and the seller have to get an attorney. The attorney fee runs about $1,500. Whatever you do, be sure to agree to paying your attorney in one lump sum, not by the hour. If something goes wrong, it can end up costing you thousands of dollars if your lawyer bills by the hour.

And finally, when you make an offer to a seller, it’s not done via signed contract. So there’s no requirement that the seller respond with 48 hours, like in most states. They can leave you hanging, and believe me, they will. I’ve never seen it done this way – you fill out a “submit offer” form, complete with all your personal financial information on it (!), and your realtor submits it to the listing agent, who passes it on to the buyer. If you ask me, my financing is none of the buyer’s business as long as I’m pre-approved. And not having a contract in place can make this part of the process a nightmare, as I found out the hard way.

Here's my personal story - just the really bad parts.

I submitted my offer on a Cobble Hill condo in Brooklyn on 11/1. It was a huge place in a converted warehouse that actually had a washer and dryer - and not the stackable kind. I'd never seen this in any NYC apartment. The seller accepted my offer that night. I was ready to go.

Unfortunately, it took the seller’s attorney ten days to get a contract to my lawyer. I was already worried about not meeting my closing deadline (and thereby losing my rate lock), but all this waiting and not knowing if the deal is going to go through or not is just plain stressful. Everyone involved kept telling me the contract would be at my attorney’s office “the next day,” but it took nearly two weeks for that to happen.

So by the time I finally got to see the contract and the condo’s financial statements, it was 11/11. That left exactly two months to close – which was cutting it really close. All that time I could have been looking at other places. When I finally saw the paperwork, I found out that the listing agent had misrepresented the taxes, the monthly maintenance amount, and the financial status of the condo association. The taxes were a lot higher than the amount the listing agent had printed on her flyer, there were three outstanding assessments needed to be paid off by the seller, and the association was operating with a negative cash flow and minimal reserves.

It wasn't looking good for me. So my attorney sent an email message to the condo association president with some pointed questions about the finances. We demanded an answer within two business days. But this jerk refused to get back to us. He never returned a single phone call – not from me, my lawyer, the listing agent, or my agent. By the time he responded to the questions, it was five painful days later, and I was out of time. Worse, he hand-wrote one-word responses to each of the questions – and every single answer except one was “unknown.” Unbelievable. When I saw that, I said the deal was off. If this was the kind of response I could expect from the association, I was not going to buy this place. I've been in a condo that cost me an arm and a leg in assessments, and I wasn't going to get involved in that again.

So I ran out of time. I'd virtually given up. But this past weekend I gave it one last shot, knowing that I was already out of time. I did find another place - in beautiful Gramercy Park, a place I've wanted to live ever since I went down there for my colonoscopy. :) If we really rushed things, it was possible we could close on time. But it was risky, since this was a co-op and the holidays were rapidly approaching. I really wanted this place - it was in a great building in a great neighborhood. And the price was right! I was the first person to attend the open house. I explained my situation to the agent and made a full-price offer then and there. She said she’d call me back at 4:30. Meanwhile, I ran all over east Manhattan looking at the rest of the open houses on my list. By 6:00 the agent still hadn’t called, and she wasn’t returning my calls or emails.

When she finally did call, she tried to lie and tell me that she couldn’t get a hold of the seller to present my offer, saying "He's an attorney, so he's probably traveling." What? I didn’t believe that for an instant, so I pressed for information. She said that “there was a lot of interest” but no other full-price offers. She hinted that the seller might want to wait a couple more days because there was so much interest. Translation: The seller was holding out for more.

This was something I just didn't want to deal with, at this point. Despite my rigid deadline, the seller left me hanging even longer, and his agent didn't call me “early morning” the next day as promised. Instead, she sends me an email around noon, basically saying that the seller was going to try to get more money for the place. Just as I suspected. Unbelievable. I reiterated to her that my lender wasn’t going to hold my loan any longer without a contract and that I needed to know something that day.

Nothing. I heard nothing. Then, get this – this broker's boss calls me at 4:55pm, suggesting that I ask my bank if they can hold off a couple more days. Like my bank’s going to still be open when I got off the phone with him. I told him that what they were pulling on me was flat-out wrong. I even used the word “unethical,” but the agent made some lame excuse about it being this way in Manhattan. Bull. This type of unethical behavior has nothing to do with Manhattan – it was all about greed. He told me that I’d know by Wednesday if my full-price offer would be accepted. There was no way I was going to live in Limbo that much longer. I was already out of time, and two more days would kill my chances of an on-time closing. At that point, I told him to tell the seller that if he doesn’t accept my offer by 8:00pm that night, I’m out. I just won’t do business with people like this any more. I’m tired of bad customer service. On principle, I just won’t do business with any person or company that mistreats people.

And another real estate deal bought the dust. I’d spent three and a half weeks looking for a place to buy. It was a lot of hard work and one of the more stressful experiences of my life – it was all about “hurry up and wait.” In the end, I determined that fate was telling me, loud and clear, that buying property in NYC is not in my future.

Oh, and would you look at that - the seller should have accepted my full-price offer. The property is still listed today: http://realestate.nytimes.com/+comshare/vulisting.asp?Lid=1472-5347. See, what goes around comes around. Greedy, greedy, greedy.

I look at it this way - I want to move closer to family anyway. But I admit I will miss New York terribly. So it would be nice if I could live within train distance from the City so I can keep coming back. Cross your fingers for me, everyone! Oh, and I'll have to find a job first. . . . yikes.