Tag Archives: house hunting

Housing Update- Contract Signed!

I mentioned in an earlier post that my wife and I were looking for a co-op. Houses are just too expensive for us. When you purchase a co-op, you do not technically own the apartment, you own shares of a co-op corporation that owns the building. There is a monthly maintenance fees that covers expenses such as heat, hot water, property taxes and staff salaries. Well after about 10 months of looking at places, we finally signed a contract on a co-op. We weren’t in a rush since our lease contains a 2-month early termination clause allowing us to move out with 2-months notice without penalty. A small one bedroom apartment with a baby is a little tight, but it’s doable. But Baby LRC is crawling a lot now and will no doubt start walking soon, so we’d like to move to a slightly bigger place.

For most people who purchase a house, after signing the contract, getting the mortgage and having the place inspected are the other big steps in closing on the house. With co-ops, unfortunately, there’s another big obstacle: the co-op board application and interview. Co-ops are similar to home owner’s associations which make silly rules as to what you can or cannot do to your home. But another thing that co-op boards can do is to deny your application to buy shares in the building. And no, they do not have to give you a reason. There have been situations where buyers have received the okay from the bank, they go to the co-op board with a mortgage in hand, only to be rejected. I’m hoping this does not happen to us. I have already reviewed the application which I’ll probably share in more detail about this process in a future post. But the application is 38 pages and asks a whole bunch of questions about your finances.

We almost didn’t put a bid on this property. When we looked at a few places, we fell in love with the fancy updated kitchen and bathrooms. The granite counter tops, the stainless steel appliances, recessed lighting and other fancy upgrades that are trendy nowadays. And even though we know that the seller will be taking their furniture with them when they move, the modern sofa with recliner, big flat screen televisions and the creatively decorated child’s room really entices my wife and I. When we went to the apartment which we eventually signed a contract for, we didn’t have any of those feelings of excitement. Let me explain. The seller is an older lady who has lived there for 20 years, and is planning on moving to be closer to her family. She keeps everything in the apartment very nice, but she hasn’t updated anything. No granite counter tops or stainless steel appliances…heck, she doesn’t even have a dishwasher. She also only has an old 25 inch tube T.V (gasp!)

Most people who buy houses usually don’t mind buying a “fixer-upper” at a discount and make the changes that they want. However, with co-ops, once again it becomes more complicated because you have to fill out an application AND pay a fee to the co-op board whenever you want to make changes to the co-op. This includes upgrading the kitchen and bathroom. They have to approve your project before you start, so many people do not want to go through this hassle. In any case, the older lady kept things very nice and it looked pretty nice. Sure, it might not have the trendy updates and decor that many places have, but when have I been a slave to the new trends? Plus, I’ve never used a dishwasher in my life, so I’m not missing out. The price was more affordable because she didn’t make fancy upgrades to it, so we will be spending a lot less than we intended. Good thing the week we saw the place, I read Are You a Prisoner of this Money Mistake? by Laurie who blogs at the Frugal Farmer. It knocked some sense into me…especially when Laurie wrote, “Don’t make the money mistake of settling for basing your life decisions and your spending decisions based on what the opinions of others are.” I can’t explain why I think granite counter tops and stainless steel appliances are better. Is it because everyone else says that it’s better and I want to impress others when they come over? Once we put a fresh coat of paint on the walls with our color of choice, make some minor updates to it and put our own touch on the place, I know the place will look great. No, there will not be any granite counter tops or stainless steel appliances, but I couldn’t care less.

Other Thoughts:
I want to give a shout out to a useful new site – MagnifyMoney. Its mission is to educate consumers so they’re able to get the right product for their specific financial situation. I think the “Compare Products” feature is very helpful to consumers. It drives me nuts when people aren’t maximizing their cash back rewards when using their credit cards, or if they’re paying various bank related fees, and if they’re not getting the highest interest rate possible in their savings account. The recommendations will save and earn you money. Erin from Broke Millenial is a part of the team so you know it’s a quality site. Hey Erin, will the site be recommending which banks have the most transparent and low cost mortgages in the future?

I’d also like to thank Joshua from CNA Finance for mentioning some of my previous posts. I recommend checking out his series “Why Bloggers Fail.” I’ve been at it for a little over a year, but still feel like a newbie so his tips are always helpful.

House Hunting Update

My wife and I have been house hunting for the last few months. Of course, when I saw house hunting, I mean co-op hunting since houses are too expensive here in NYC. When you purchase a co-op, you do not technically own the apartment, you own shares of a co-op corporation that owns the building. There is a monthly maintenance fees that covers expenses such as heat, hot water, property taxes and staff salaries.

Co-op #1

We found a place only one block away from where we currently lived that we liked. We are familiar with the area and like it, and it is in a good school district. Yes, with a baby a good school district always is an important consideration. We are looking at 2 bedroom co-ops which are approximately 900 to 1000 square feet. The co-op was listed at $321,000. We offered $300,000. The seller countered with $315,000. We came back with $305,000. The seller said they would take no less than $315,000.

I created a comparative analysis of the property to determine what a fair price would be. I went on Redfin and looked up similar properties that were sold in the area. There are a few co-ops sold in the last few years which were even in the same building complex, so that is a great comparison. I looked at what the seller paid for the co-op and took into consideration the renovations that were made. Based on that analysis, it seemed that the price was relatively fair. The co-ops in that area which were comparable ranged from $290,000 to $325,000. But, this listing was new to the market and the seller was not anxious to move, unlike other places we saw where the owner had already moved to a new home. We were in no rush to move either. Our one bedroom is getting a little tight, but we’re okay staying there for the time being. A few other reasons why I thought we had time was that it was winter and the weather hasn’t been that great. With the holidays upon us, I figured there wouldn’t be many people rushing to buy a place. So at this point, it was just a staring contest, each of us waiting for the other to blink.

Well, I was right! The seller blinked. The day before Thanksgiving, they said they were willing to drop the price to $310,000. We accepted. During the Thanksgiving weekend, not much was going on, and I didn’t expect anything to go on being that it was the holidays. But a few days into the weekday, I received a call from my realtor telling me that someone had made a higher bid: $316,000. What?! As much as it pained me, we matched that price, even though we could have had it for $315,000. The other buyer raised another $2000. We didn’t want to get into a bidding war, and didn’t come back with an even higher offer. Losing out on the property was a bit disappointing. I started questioning myself for not being more aggressive. Maybe I should have just accepted the seller’s counter-offer. Oh well, nothing we can do now.

Co-op #2

We found a co-op listed at $305,000 that we were interested in. The sellers had dropped the price from $325,000 to $315,000 to $305,000. They were desperate to sell. Apparently, they had accepted an offer, the buyer had gotten a mortgage, but the co-op board rejected this buyer. The seller already bought a house in Long Island and didn’t want to have two mortgages. We made an offer of $295,000. The sellers said that $305,000 is the lowest the co-op board would allow so they couldn’t lower the price, but offered to give us $5,000 upon closing. We agreed. The sellers asked for a plethora of financial information from us such as bank statements, credit report, etc to show that we would be able to afford the place and pass the board interview. The board there is strict, and they were already burned by the previous rejection. I don’t like giving all this private financial information out, but that is the nature of co-op boards. After a few days of looking at our financial information, the sellers rejected our offer! According to my realtor, one of the reasons was because my wife had two late payments on her credit card. Yes, my wife was not careful and paid some bills late. It was one for $17 in 2007 and one for $29 in 2011. Really? They rejected our offer just because of that? How strict is this board? Maybe we’re better off not buying it. In anycase, my wife needs to be more careful with paying her bills on time. She might need to automate her bills and use Credit Sesame to monitor her credit.

Mortgage and Real Estate Trends

While I don’t have a crystal ball, it seems like mortgage rates are trending upwards. No, I don’t think it’s a good idea to rush into a mortgage just because I think it will go up, but since we’re ready to buy, I do feel a sense of urgency. I don’t think there is anything wrong with renting, but I think buying will work out better as we’re planning on staying for a while. Another reason is that I have a feeling that the housing market is trending upwards in my area also. Manhattan real estate is expensive, and this has spread to Brooklyn which has a really hot real estate market. I have a feeling that those who are priced out will be looking into Queens pushing the prices up here too.

Does any one have house hunting and negotiation tips? Should I have been more aggressive and accepted the seller’s counter-offer?

I’d like to thank K.K from Student Loan Survivor and Everybody Loves Your Money for sharing my post Shamed For My Frugality.