I came to the U.S. with less than a $1000. I spent $650 in the first week on the deposit and rent for my share of a 1-bedroom rental and lived on the remaining money for the several weeks than preceded my first paycheck. In the next 12 years that I lived in the Midwest, I had neither the funds nor the inclination to think about purchasing a home. It was simply outside the realm of possibility. I figured older adults with a lifetime of savings bought homes. I was a lowly grad student for much of that time and a marginally less lowly full-time employee for a few years. I also have commitment issues.
When I moved to New York, where the real estate market seemed insane, opaque, and designed to screw you over, purchasing property was inconceivable. After two years of paying rapidly rising rents, however, I finally realized that the only way I could afford to live here in the long run was to buy something, even if it was a closet.
My hunt for an apartment began less than effectively in May 2014. A few months before this, I had contacted my bank about getting “pre-approved” for a loan and after obtaining that document, I started looking at apartment listings on the New York Times site, and sites like Trulia and Zillow.
There are two kinds of apartment buildings in this city: co-ops (where you purchase shares assigned to an apartment) and condos (where you purchase actual property). After calling a few of them, I would go to a scheduled showing and listen to the broker’s spiel about how this was a steal. It was often not the case.
Eventually, I found an apartment I loved during an open house that I attended on a whim with a friend. (Open houses are often scheduled in the middle of the day on weekends and advertised either by signs on a sidewalk, and sometimes on the real estate websites listed above.) It was a lovely, updated 1-bedroom close to where I wanted to be, with amenities that I found desirable. I told the seller’s broker that I found the listed price agreeable and that I’d send him my written offer soon.
At this point, I ended up hiring one of the brokers I had met during my hunt to be my broker. She told me to never speak directly to the seller or the other broker from now on. Instead, she asked me to give her my financial documents to send to the broker so I could be seen as a serious buyer. But then, she told me the other broker was refusing to cut her the share of commission that she felt she deserved and so she refused to work with him. Then she called to let me know that they had come to an agreement and we could proceed. I felt uneasy but went along.
To her credit, she actually got the other party to lower the price a little and even agree to pay half the closing costs. In case this phrase is meaningless to you, “closing costs” are the fees you end up paying for a lawyer, to the building’s owners/managers, the mortgage lender, etc. So far, so good.
Then it went downhill. The seller’s broker wanted my lawyer’s contact information but I hadn’t realized that I needed to have a lawyer lined up. In my naivete, I thought I had to get someone to inspect the apartment to decide if it was sound and worth the offered price, and then we’d proceed to legal matters. That’s not how it works.
Apparently a buyer in New York city must prepare a financial package—three months of bank statements, at least two pay stubs, two years of tax returns, a letter from your employer, statements regarding any other assets—and have a lawyer waiting in the wings before making an offer to a seller. As soon as the seller and you (or your brokers) settle on a price, the seller’s broker contacts the buyer’s broker and gets your lawyer’s information (and shares the seller’s lawyer’s information).
The lawyers hammer out the contract. Only after the contract is signed by both parties (and thus “executed”), does the bank and the appraiser (who assesses the worth of the property) get involved.
So, I had made an offer but didn’t have a lawyer. I contacted several based on different people’s recommendations. They quoted different rates, some varying by as much as $500. In the meantime, my broker wanted me to meet her and sign some paperwork. I did so, but didn’t quite realize what it was. Later, I figured out that it’s a document called a “binder” which is a sort of proto-contract, and ties all the parties (buyer, seller, brokers) together.
Even after I signed this, however, I couldn’t decide on a lawyer and it felt like the broker was pressuring me to hurry. She had also suggested I contact a “mortgage broker” she recommended, who is apparently someone who shops around and finds the best mortgage rates for you. I started to feel uncomfortable with the speed and wondered if there was something off about the whole process. In addition, I was finally starting to realize that this was not going to be a matter of just giving the seller a down payment (which has to be at least 20% in most co-op purchases) and the pre-approval letter.
Instead, buying an apartment can take 4 months, and the very last step is a co-op board interview that can result in the board members refusing your application despite the signed contract—and giving no reason whatsoever.
My inchoate plan had been to “buy” an apartment in a month’s time before I left for a long trip to Europe. One of those things was clearly not going to happen. After much agonizing, I decided that I couldn’t go through with the offer. My broker seemed fairly pragmatic about my change of heart and just had me rescind the offer in writing. Though the only course available to me at that moment, it would still be a decision that would come to haunt me in my search the following year…