For a few months now we've been trying to redact the illuminating, harrowing (sometimes sordid) account of what it took one Platinum Member to eventually land the gem at 123 Gates Avenue. We had titled it "Diary of a Platinum Member" and couldn't quite get a version that was juicy enough to pack a punch without offending some of the lesser-behaved parties involved. Luckily, one of the buyers is a writer herself and put together a much more diplomatic account of the process into something digestible for a wider audience and quite educational.
To that end, we present you with "Diary of a Platinum Member", AKA "How I Learned to Stop Worrying and Love the Boom".
Or, better yet, let's just let the author use her own title...
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The Two-Year Hunt: How To Buy in a Seller’s Market While Maintaining Your Sanity
Hopeful buyers line up in the cold to view a Crown Heights brownstone
The apartment (or house) hunt–especially if the hunting is being done in New York City–is the subject of a million nightmare stories. Bidding wars, investors with suitcases full of cash, open houses with block-long lines, estate properties tied up for years in family squabbles, contracts that turn to dust over tiny details, sellers who change their minds–they exist in myth and in reality. Each story seems more unbelievable than the last, and everyone thinks their story is worse.
Ours was not the worst. And it ended well. And those are the best things I can say about a two-year hunt that covered hundreds of apartments and townhouses throughout some of Brooklyn’s most sought-after neighborhoods. During that time we were booted from an accepted offer (on one of the last great deals in the neighborhood.); we walked away from several others (a bona fide celebrity bought one of our rejects); we got to know pretty much every broker in the area from the mom-and-pops to the polished pros; we were outbid–by cash offers, end-users and investors–on too many occasions to count (including on the house we actually now own).
Just small handful of the addresses we scouted on our hunt
When we began looking for a New York City home, my fiancé and I set a budget and began our search for a nice two-bedroom apartment, condo, co-op or perhaps a house or quirky garage/loft space to renovate. I had lived in the city for nearly two decades and was well-versed in the more subtle differences between its unique neighborhoods and in the many socioeconomic changes that affect real estate markets. He had dabbled in real estate for most of his life and wasn’t daunted by the many moving parts involved in financing, purchasing and renovating property.
We identified our wants and deal-breakers and our ideal neighborhoods–some top choices, others on a case-by-case basis. Many, many apartments in our price range left us underwhelmed. “Mr. Pickypants” earned his moniker as brownstone “ant farm” apartments and newly-constructed drywalled boxes failed to impress as suitable dwellings given the seemingly enormous chunk of money we were offering to trade for the privilege of owning them.
The townhouse bug (it had always been a dream but not a goal) first bit us when we were outbid on a big triplex condo in a two-condo brick townhouse on a lovely Clinton Hill street. After deciding we should kick our budget up a notch (coupled with the idea that rental income was not a bad idea, as it would help us obtain more financing and provide actual income to offset the mortgage), we focused our search on the elusive Brooklyn Brownstone.
This was about six months into our search, sometime in 2012, which was precisely the moment a significant portion of the real-estate hunting public was making the same decision. During the time that comprised our search, Brooklyn real estate prices hit a ten year high and townhouse prices leapt by over 25%. Houses that were under a million dollars when we first threw our hat into the ring were now a million and a half, even two. And inventory was at a record low.
The four-story 1860s townhouse on a leafy street in the Clinton Hill Historic District–just around the corner from the aforementioned elusive triplex–that we finally bought was the house we liked best of all, and the neighborhood was among our top choices. We began chasing it (with a late-night email from me that instructed, “BUY IT NOW!”) a full year before the sellers would even accept an offer due to estate legal issues. Once that hurdle was cleared, the price went up. We submitted another offer. We were outbid.
The winning bidder (an Australian investment fund) didn’t sign the contract. Closing took many more months even after the call from the broker telling us we were next in line (more estate issues, some of which almost sent the whole thing out the window). And during all of it, we kept up the hunt, because we had zero faith in things working out with this particular property. In the end, the closing, among a tableful of geeky lawyers, was anticlimactic, though joyous nonetheless.
Our two-year search ended well (so far, anyway) both investment-wise and because we love the house, though a comprehensive renovation looms menacingly on the horizon. But it’s really a jungle out there. And though we’re both experienced in some ways and green in others, we learned an enormous amount of stuff we’d never had any idea about before.
The one that didn’t get away
What the experience was not was terribly emotional–though it had its anxious and extremely tedious moments–we both had a healthy sense of perspective on it, which is key to maintaining one’s sanity when hunting for real estate. And we certainly survived. It’s both as bad as everyone says and not as bad as you’re afraid it might be. Be prepared, not afraid.
To that end, here are some of the important things we learned:
Commit the time and cast a wide net.
Though you may feel like you don’t have the time to spare, it is absolutely worth it to dedicate time to the hunt. I found our house while trawling through generic online listings in the middle of night for probably the fourth time that day; I had to practically stalk the property agents to even get a return phone call.
Your search resources should be many.
Regardless of how helpful they may be in making appointments to view properties and keeping after seller’s agents, you can’t rely on brokers to find every property that might be of interest to you. At first, finding listings will seem daunting; there are so many properties on the market it seems you’ll definitely miss something good. There will come a time in your search when you’re pretty much familiar with everything on the market. Then it gets easier because your regular searches will just turn up what’s new.
Make the internet your friend. Tailor your search in real estate sections of local papers and sites like Streeteasy, and sign up for daily mailings in any neighborhoods and price ranges you’d even consider. Make your search parameters wide; home prices regularly get chopped and, believe it or not, offers below ask are sometimes accepted. I even periodically searched all listed properties for sale in the entire borough. Look on real estate agencies’ sites as well, especially on the pages of agents who have represented properties you’ve liked.
In addition to real estate agents, “connectors” like Jonah Landman, who publishes the blog BK to the Fullest, make it their business to keep their ear to the ground for off-market deals and pre-market tips. If you find one you can trust, they’re worth the upfront payment; the information they provide is golden.
Ask friends, neighbors and colleagues how they found their homes. You’ll find some resources aren’t very helpful (for example, I signed up for a ton of foreclosure notice mailings early on but found they don’t really turn up in my areas of interest). You’ll soon discover which sources turn up the best finds. Check them daily if possible.
Pound the pavement. It sounds old-fashioned, but you might be surprised at how many people found their homes this way. Walk around neighborhoods you love and look for “For Sale” signs and call immediately. We found out about a house we liked, an amazing Prospect Heights brownstone (one of many on which we were outbid), from someone who saw a tiny, hand-printed sign in a parlor floor window. Hit neighborhood real estate offices as well. Sometimes the local guys have a line on homes before anyone else.
This Dahlander-designed Prospect Heights beauty was never listed, just the sign in the window. Outbid, but so close!
Know your market.
The NYC real estate market is unique and neighborhood property values can change almost overnight (though this “change” is usually in an upward direction). Compete on a realistic level by getting to know what comparable properties are selling for NOW (not two years or even six months ago), in the exact area you’re looking in. Look at sales prices, but realize those can be out of date since properties can take a long time to close. Look at listing prices and read local real estate blogs like this one to get feedback on neighborhood pricing. Keep up on neighborhood news and what’s on the horizon for the neighborhood as far as trends, recent changes and planned developments. Spend some time in neighborhoods you’re interested in or that have been recommended to get a feel for what they’re really like at different times of the day. Spend time in a local cafe; see who gets out of the subway station at rush hour; investigate the street scene after dark. Read up and ask around. First impressions can be very deceiving.
Get your team in place early.
Find a good real estate attorney and mortgage broker or brokers early in the game. You might have to go through a few to find the right fit. Having good pros on board can also help you decide on properties with any legal or financial issues that may scare away other buyers.
Get your financing in order
Besides needing to know what your mortgage situation will be, a pre-approved offer, and, to a lesser degree, a pre-qualified offer, gets you miles ahead of an offer that hasn’t been vetted by a lender. Things happen fast when a great home hits the market. If your offer isn’t seen as serious, someone else will bump you out of the running. Know how much of a down payment you can make. More cash is most often seen as better, but there is no shortage of sellers who are fine with financing, regardless of what you hear. And, maybe most importantly, obtaining financing is one of the biggest and most stressful logistical hurdles in the entire process. Doing the legwork early can make things much easier once you’ve advanced to actually attempting to close a deal. Also, be aware that your financing status may change with each new tax return you file, and you’ll be required to provide the most recent one.
Play the field.
We didn’t find having only one broker to be advantageous. For one, though it’s not considered fair play, some listing agents (especially among small neighborhood companies or single agents) don’t like to share their commissions with another broker and may give an advantage to unrepresented buyers. We also found that sampling the wares of the many different brokers that showed us their properties exposed us to a broader range of options. This “serial dating” method can also help you find a broker you favor for the remainder of your search. It should be approached carefully, though. If one agent shows you a property, you’ll raise legal and certainly emotional issues if you attempt to bring another broker to the table on that property. You can play the field but don’t be a jerk; you will very likely see the same faces again in your search.
Be prepared to make an offer right away.
This freaked us out at first as I think it does with a lot of people. In New York, an accepted offer isn’t legally binding, it’s basically just an informal signed agreement between all parties that the property will be taken off the open market (though the sellers may continue to show it) and the offering party will get a chance to sign a contract. Basically it gets your hat in the ring; you’re not liable for any costs if you walk away; on the other side, the seller isn’t liable if they decide to sell the house to another bidder, so don’t dither once your offer is accepted.
If you’re reasonably sure you want the property, make the offer. It should be an amount that will, basically, get you the apartment. Reams have been written about this, but just to touch on the subject, “lowball” offers are a waste of time and may annoy the seller. Offers can be below ask, but have a good idea of what the comparable properties in the area are going for. You want the home; convey this through your offer. You may be asked for your “best and final” offer. That’s exactly what it means, the most you’re willing to offer with no counter-offer expected. The sellers will evaluate everyone’s offer and, basically, pick one.
As an aside, “cash offers” are often simply offers that do not include a mortgage contingency. The standard offer with a financed purchase informs the seller that the intent to purchase the property will be contingent upon the buyers’ ability to obtain financing and, usually, a report from a certified building inspector. Making the offer non-contingent on financing means you won’t have the right to get out of the subsequent contract if a lender won’t lend you the money to buy the property. It’s sometimes considered a “cash” offer, but in many cases the buyer just takes the risk and gets a mortgage anyway. As long as the deal goes through, it doesn’t matter. Non-contingent offers get sellers’ attention because they mean less time before closing and they’re more of a sure thing early on. Talk to your lawyer and mortgage broker about contingency waivers, but unless you really do have the cash or a guarantee of ability to obtain the funds, they are not recommended.
Be prepared to walk away.
This one may be even tougher. No one is suggesting you submit offers frivolously, but given the above reality, you’re getting very little time to decide on a significant financial commitment to what could be your family’s home for years to come. Though you don’t want to waste time before signing a contract, you’ll have a small window of time to do things like get the property inspected by a certified inspector, see how far the it really is from subways, how the block feels after dark, and, if you happened to be the winning bidder on multiple properties, decide which one is best rather than trying to make that decision on a dime amid a frenzy of prospective buyers. It may make you feel kind of crazypants at first (and brokers may try to discourage you), but you’ll get used to it. Remember, your goal is to find a home you love, not to make everyone else happy.
Don’t annoy the sellers.
Unfortunately in a sellers’ market, you’re buying the property on the sellers’ terms. Trying to haggle and make demands beyond the most obvious (such as removal of seventy linear feet of disturbed asbestos in the basement) will simply get the house sold to the next guy in line who’s willing to deal with the issue himself. It may be an unwelcome reality but there’s no getting around it.
We had an accepted offer, then got bumped for another buyer on this Clinton Hill steal.
Know your dealbreakers.
This is a common topic as well. Know what you absolutely need and don’t get distracted by things that wow you in the moment. A totally amazing landscaped yard might be a cool thing to have, but 1. you only use the yard half the year, and 2. you can landscape the yard yourself. Is it worth paying a premium or buying a house that isn’t up to your standards otherwise to get that wow factor out of the box? Kitchens are relatively inexpensive to re-do, even to move to another floor. “I hate the kitchen cabinets” is absolutely not a reason to pass on a house or apartment that is otherwise great.
When it comes to prioritizing, the old adage, location, location, location, is worth heeding; you can change any number of things about a home, but you can’t move it to another neighborhood, off a noisy or sketchy block or closer to the subway. And prices in prime neighborhoods tend to climb fast. When in doubt, give location a high priority.
In our case, we didn’t want to be on the ground floor, or in a walkup above the second floor. Outdoor space became a must (even, in the case of apartments, if it was common space). As our search progressed we ruled out certain blocks and neighborhoods completely. The more you can rule out quickly, the more it helps to avoid wasting your time.
Embrace adversity.
For example, staying on top of the hunt during traditional real estate down times like the winter holidays or the dog days of summer may find less on the market but also takes a lot of competition out of the running. If you’re willing to put in the renovation work, unattractive and outdated finishes may also thin out the competition. If you know your markets, egregiously high price tags can dissuade buyers. Keep an eye on the property and see if it stays on the market (it likely will). Keep checking in; the seller may be glad to accept a more reasonable offer after having no takers for a while. Even seemingly thorny legal issues can put someone who is savvy about those issues in a prime place to make a deal.
Keep track and follow up.
Even if a house you love was snatched up by someone else, they may drop out before closing. The house may go back on the market. It doesn’t hurt to check in with the seller’s agent periodically to see if a contract was signed. You may get a window of opportunity if things fall through and the sellers don’t want to go through the hassle of re-listing.
A note on staying sane.
This is the “soft” advice that doesn’t involve dollar signs or priority lists.
- It’s important to keep things in perspective. Remember the things you already have and are happy with prior to your new acquisition. Assuming you already have a serviceable roof over your head, it’s just an apartment (or a house), and your life is fine without it, right?
- If there are two (or more) of you, be a team. Divide tasks (getting financing, finding listings, calling brokers) and make sure you are diligent in doing what you’ve signed up for. If you’re asked to pinch hit for the other guy’s job, do it willingly (I think this strategy is what really made our operation a well-oiled machine bound for success).
- As scary as it sounds, if you really, really hate it, you can sell it. No one wants to think that way, but this isn’t a situation without any kind of exit strategy (especially in a sellers’ market!). Choose wisely but don’t give the choice more significance than it needs to have.
- Take a break or two. It’s important to devote time to the search in order to succeed (and yes, it will even seem like another full time job at times), but taking the occasional breather keeps things in perspective.
- Try not to take it too seriously. A sense of humor goes a long way in a stressful situation.
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