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At my homebuyer seminars, I always begin by addressing the pervasive misconceptions about buying an apartment in NYC. Here are six things that I hear all the time:
1.) “I’m not going to live in New York forever.” NYC has a way of sucking you in no matter what your intentions, but that’s beside the point. Buying an apartment in NYC need not be a lifelong financial commitment since most buyers can expect to break even within five years, and that’s assuming a very modest rate of appreciation. Of course, this may not hold true in the event of a significant economic downturn (like 2008), but even in such cases, NYC’s market has shown its resiliency by bouncing back within a few years and then exceeding pre-recession values. For that reason, it is important to plan ahead to avoid being in the position of selling during a downturn.
2.) “I can save money by not working with a buyer’s agent.” A buyer’s agent is compensated, indirectly, by the seller via his agent. The person who gets a windfall when a buyer is unrepresented is the seller’s agent since most listing contracts have the same commission regardless of whether the seller’s agent has to share his or her commission with the buyer’s agent. Having an agent on the buy-side means the buyer’s interests are better represented, and the buyer has someone to negotiate on their behalf, rather than the seller’s agent acting in a dual capacity representing both buyer and seller. In almost all sale transactions in NYC there are agents on both sides, and in my personal experience, prospective buyers who are unrepresented tend to present haphazard offer packages at non-competitive levels. Being represented by an experienced agent also sends a signal to a seller that the buyer is serious and will be prepared throughout the process.
3.) “I can’t buy as nice of an apartment as I can rent.”
To the surprise of many buyers, the monthly carrying costs of owning a home (including mortgage payments) can be roughly the same as the monthly rent on a comparable unit. Even where monthly costs are slightly higher than a comparable rent price, unlike rent paid to a landlord, a big chunk of these payments (often ⅓ or more) goes toward the equity in the property and other portions may be tax deductible.
4.) “I want to buy a condo, so I can renovate it how I want.”
The perception that condo boards will let you do what you want is generally misplaced. If you live in a building where you share walls, entrances, and elevators with other residents, you can’t renovate willy nilly. Almost all buildings (both condo and coop) have alteration agreements which set forth rules regulating how renovations are done in order to protect the quality of life of other residents (such as hours of construction, duration of renovations, use of elevators….) and to maintain the physical integrity of the building (such as requiring an architect to vet layout changes, prohibiting wet over dry, … ). Alteration agreements aren’t designed to destroy an owner’s renovation dreams, but rather to make sure that one person’s toilet doesn’t leak down into someone else’s living room, or that your neighbor’s renovation doesn’t last 6 years. Often, boards will welcome renovations that are done properly and safely as these raise property values in the building.
5.) “The cheaper the apartment, the better the deal.”
Many first-time homebuyers are easily enticed by listings that at first glance appear to be a bargain. However, an unexpectedly low price tag almost always means there is something about the property that makes it worth inherently less than comparable properties or that the building’s financial condition makes ownership costlier or more risky. The market here is highly efficient and moves quickly unlike many places, so a lower price tag is not usually about timing or a lack of buyers at that particular time, but due to some flaw or immutable characteristic which will limit the upside in the future. That said, there is a property for everyone, so if a buyer is ok with brick wall views and lack of light, they can pay less and enjoy the space all the same so long as they remember that when it comes time to sell, the property won’t be right for everyone so the selling price down the line will also be below market.
6.) “I’m too early in my search to reach out to an agent.”
Many first-time buyers only reach out to agents once they are fully ready to buy. Before that, they have spent countless hours thinking about their budget and stressing out without actually having the right information. A good agent would never push a buyer to rush the process, but can save a potential buyer lots of time and wasted energy, as well as getting them on a more efficient plan to be ready to buy. It is never too soon to reach out to an agent who will be able to answer your preliminary questions, and help you feel at ease and knowledgeable throughout every stage or your search (even if that stage is just browsing listings for fun).
Buying a home is one of the biggest decisions someone can make, but it doesn’t need to be the most painful. If you or someone you know is thinking about buying a home, we are here to help with any questions, big or small.