We all remember our first time … reaching a big financial goal. The planning! The stress! The self-doubt! And then, finally, that massive sense of accomplishment (and relief). In our “My First Time …” series, LearnVest asks people who’ve reached huge money milestones how they did it — and for lessons they learned along the way.
Here, a writer in New York City recalls how she navigated the wild world of New York real estate to buy her first apartment.
I'd been looking for an apartment in New York City for about six months when I told myself I should give up.
I had started out optimistic. Between what I had saved and what my parents had offered to help me with, I figured I could put around 25% down on a $400,000 or so studio apartment in downtown Manhattan, which would put a potential mortgage payment (plus maintenance fees) at about the same cost as renting an apartment in Brooklyn, where I was living.
I spent basically every Sunday from late 2011 to mid 2012 sprinting to back-to-back open houses, meeting sellers’ brokers who barely looked up from their Tupperware lunches when I walked in. Every offer I made was rejected, and each one seemed to be turned down faster than the last. I didn’t gel with any buyer’s brokers I met, either. When I asked one what to offer on an apartment, she told me, “Just offer what they’re asking.”
So I decided to go it alone. I told myself, “I can do this. I can buy my own place.” And I did — but it would take about a year of confusion and frustration.
Going It Alone
My first step: I got a copy of “Everything You Need to Know Before Buying a Co-op, Condo, or Townhouse,” but, honestly, it was the same as having never read it. My friend Andrea, who had already bought an apartment, was really the resource for answering my many questions.
The small studio on East 11th Street was the one that made me feel like I should quit. I loved the big windows, and how the owners used a lucite partition to create what felt like a real bedroom without shrinking the space. It was in my price range, and I made an offer slightly below the asking price. The seller’s broker told me he was confident the owners would accept.
Making offers was fairly easy. I’d send the broker my mortgage pre-approval from the bank (a form that I got after about three emails with a mortgage broker that Andrea recommended) and a quick rundown of my finances, basically how much money I had versus what I owed in debts. I went on a work trip, dreaming about what mornings would be like when I was waking up in my new apartment, but got worried when I didn’t hear back. When I finally did, the news was not good: “I have another offer, all cash, sorry,” the broker wrote.
OK — maybe I couldn’t buy my own place.
I took a break for a few weeks and then, out of habit, started browsing open houses again. But this time, I focused on my current neighborhood of south Brooklyn. Up until then, I’d only looked in Manhattan. I’m not exactly sure why. I’d barely even seen Sex & the City and had been happily living in Brooklyn for a few years. But for some reason, the weightiness of buying a home made me feel that I should do it in Manhattan. It only took six months and many figurative door slams in my face to make me let go of that idea.
Starting Over in a New Borough
When I started seeing apartments in Brooklyn, I didn’t find a dreamland of flawlessly renovated, inexpensive places, but at least the apartments in my price range were bigger than what I’d found before. For around $400,000 I could afford a one bedroom, and after a couple of Sunday open houses, I found an apartment I wanted to make an offer on.
I’d been charmed by the building’s red door and wrought-iron fence. “This can’t be the right place,” I thought when I first went to see it, because I was used to apartments in my price range being in complexes that looked like factories. But on the fifth floor was a simple, L-shaped apartment with plenty of sunlight, along with a big kitchen and living room. The bedroom didn’t have a closet, the light fixtures were dated, and the kitchen had a Santa Fe vibe I wasn’t into, but I could see myself living there.
I made an offer that was a little below asking price. The seller countered. I raised my offer by about $10,000. I remember I was about to get on the subway when I got the broker’s voicemail telling me my offer had been accepted. I panicked, walked out of the station, and did at least 20 laps around the block before I called back.
From Making the Offer to Getting the Keys
Thankfully, there are a lot of steps to be completed between having an offer accepted and getting the keys to an apartment, because I needed that time to settle into the reality that I was about to become a homeowner — and decimate my savings.
First, an attorney had to look at the contract I was supposed to sign saying that if I got a mortgage, I’d be buying the apartment. When I went to his office to sign it, I also had to leave a deposit of 10% of the sale price. “I bet that’s the biggest check you’ve ever written,” the attorney joked when I handed it to him. It was.
For the next four months, it felt like I never put my checkbook away. Closing costs, in New York at least, are expensive. The buyer pays for everything from bank fees to the cost of a “transfer agent” who moves the apartment deed from the seller’s bank to the buyer’s — all of which adds a couple thousand dollars, minimum, onto the sale price. Thankfully, I was able to get a relatively low interest rate on my 30-year mortgage, about 3.5%, which thrilled me.
I was buying an apartment in a co-op, which meant that technically I wasn’t paying for my physical property — I was buying shares into the corporation that owned the building. That meant there was one more hurdle before the apartment would be mine: I had to be approved by the co-op board. To help them feel comfortable that their new neighbor isn’t going to default on the mortgage or co-op fees, co-op boards usually require as much information about a buyer’s financial history as banks do, if not more. I also had to submit three letters of recommendation and do an in-person interview.
During that meeting I realized just what it meant to be part of a co-op: You basically have no privacy from your fellow shareholders. For instance, one of the board members asked if I was planning to do any renovations. “I’m thinking about re-doing the kitchen at some point,” I said.
“Why?” another board member asked. “I’ve been in your kitchen. It’s nice.”
Luckily, the board approved me, which meant the only part of the process left was the official closing: sitting in a conference room, signing a pile of papers. There were about 10 men there with me, most of whom I’d never met. At this point, I didn’t care who they were — all I was interested in was seeing the stack of forms in front of me get smaller as I signed on every dotted line they put in front of me.
Then, finally, a year after I had started the house hunt, I had the keys to my very own place. I used them for the first time the night of the closing. I walked into my new home, sat on the floor, opened the bottle of champagne I’d brought with me, and drank it straight from the bottle.