Making the Tarnsition form One Apartment to the Next
So, you want to sell your apartment and buy another one. Well, there will be plenty of demand for your home because of todays strong sellers market. But that same strong market can work against you when youre out shopping and have to compete with everyone else who wants to buy.
"Anyone can put a property on the market and sell it," says Kay Brover, executive vice president of Douglas Elliman, a residential real estate brokerage firm in Manhattan, "which means then youre suddenly cast out into New York City with a fear of not having a home."
But hold tight. If youre simultaneously buying and selling, youre not necessarily doomed. With some preparation, patience and professional guidance, you should sail through a fairly smooth transition.
The First Step
Before you even start shopping, you need to determine what you can afford. Most likely, youll need the proceeds from your old home in order to buy a new one.
The first thing you should do is find out what your apartments immediate, two-week selling price and optimal, six-month selling prices are. Real estate brokers are the most reliable sources for finding these figures. "When you enter into a transaction, you need to assume youll get the two-week price," says Neil Binder, principal of Bellmarc, a residential real estate brokerage firm in Manhattan.
"This gives some kind of foundation, of economic parameters, and you should use [the figure] as a framework for your decisions." Dont shop on the hopes youll have proceeds from the six-month price.
Haste Makes Waste
The first thing you should ask yourself is, "Can I Wait?" Your approach will differ based on how urgently you need to move. The longer you are able to wait, the more likely your apartment will sell at its optimal price. Youll also be more apt to make a wise buying decision.
Keep in mind "theres no such thing as a unique apartment, there are only good deals" says Binder, "In reality, there are many homes youll like. You just have to take the time to look."
Dont be misled by thinking youve found a steal, Binder advises. This happens mainly for those who dont need financing to buy; since they can bring forth full payment sooner, they are more likely to leap. But if you rush, you might be the one who is being stolen from, instead. If you havent done enough research, you might later discover your precious purchase wasnt such a phenomenal fit after all. Immediately signing for an apartment might lead you to overlook important details. An informed buyer should be familiar with the history of, and plans for, their new building. What is the buildings financial condition? Are there anticipated future projects? What are the house rules and bylaws? How many units are sponsor-owned?
You should look over board minutes and the buildings financial statements for the last two years, and survey the latest engineering reports. "Look at the difference between the price at a steal and the market price," Binder instructs. "I refer to the [difference between them] as an insurance premium for making a reflective decision.
"Although its not common practice, living in an interim rental is a wise way to make the transition from old home to new. This way you can handle selling your apartment and buying the next one as separate transactions." It rarely happens that way," Binder says. "Usually people know they want to move, and in the course of looking, they find something they just fall in love with thats why you need to be mentally prepared to sell your home at its two-week price. But if people just took the time to sell, they would be able to make optimal decisions."
Handling the Finances
If you are going to need financing, as most people do, Binder suggests consulting with a mortgage broker as soon as you start thinking about buying. You want to be informed of your borrowing power ahead of time. "I always ask people if they need to sell in order to buy," says Dan Levitan, managing director of Home Mortgage Acceptance Corp., a mortgage brokerage firm in Manhattan. "If they do, Ill get them a pre-commitment letter."
Based on your income, assets and credit history, a mortgage broker will be able to tell you how large a loan you can land. "Its more of relieving a mental stress," says Levitan. "This way your getting yourself ahead." Because the market is so competitive, 40 percent of Levitans clients have come to him for pre-commitment letters before buying a new place.
If youre not working through brokers, find out which banks have made loans to people who have recently purchased units in the building youre looking at, suggests Jeff Levy, vice president of Argo Corporation, a property management firm in Manhattan. "If youre a qualified buyer, theyll probably do the same for you," he says.
Not surprisingly, youre more likely to land a new place if you dont need financing. "Cash is king," says Brover. "To a seller, its very attractive to say, Ill pay all cash." If youre pretty sure you can pay it all, but still want to look for loans, you can sign a non-contingency contract. This is a risky tactic, though: you have until the closing date to find financing, but if it doesnt come through, youll have to fork over the dough.
Be an Informed Player
Once you know how much you can pay, snoop around to find out the general price for your preferred property. You can do this by looking through newspaper ads to see the prices at which comparable properties are listed.
Before you bid, be sure of how much you can afford. As a rule of thumb, in New York City, expenses should comprise no more than one-third your income. For example, if your mortgage is $1,000 per month, maintenance fees are $800 per month, and you have personal debt of $200 per month, your expenses for the year amount to $24,000. Therefore, your income should be at least $72,000. This calculation plays into co-op boards evaluations, so you should give it due consideration.
Finding a knowledgeable broker to guide you will probably prove invaluable because he or she deals with the market on a regular basis and is familiar with its nuances. Brokers also have a keen sense of whether you are a proper candidate for a certain building.
"Its important to look at a broker not just as someone selling property," says Brover. "A good broker will know the financial history of a building, will tell you what they think the board will require, or whether you have enough liquid assets."
A broker is particularly helpful during the board review process, a required step in trying to buy a co-op. "There are no rules," says Brover. "Every board sees for itself who it wants in the building."
In general, boards look at income, assets, debt and credit history. They might also consider social issues. For example, a board may not want high-profile people living on the grounds because of notoriety, Brover says.
"This is where a good broker moves you along and advises you," says Diane Ramirez, president of The Halstead Property Company, a residential real estate brokerage firm in Manhattan. "A good broker should have a feel for a building."
The better prepared you are for a board interview, and the fewer questions the board has, the more likely you will be approved. And that thumbs-up from the board can be your signal that you have successfully navigated the buying and selling process.
Ms. Malek is a freelance writer living in Manhattan.