The New York City homebuying guide

homebuying - nyc

Everything you need to know before launching a house hunt in NYC

Buying a home in New York City is a daunting task, particularly after you take a hard look at some numbers: The median sales price in Manhattan currently sits at $1.1 million, and median sales prices in both Brooklyn and Queens have increased to $808,000 and $573,500, respectively. And sellers typically expect a 20 percent down payment for listings, meaning you’ll need at least $100,000—if not much more—on hand.

Meanwhile, the median income in NYC is just over $57,000, according to the latest census survey; suddenly, buying a home can seem not just difficult, but downright impossible.

But there’s some good news: NYC is in the midst of a building boom, and with more supply than demand, buyers often have the upper hand in getting the best deals. Furthermore, the real estate market has been experiencing a downturn of late (particularly in Manhattan), and prices are expected to go down further, according to Stephen Geller, a broker at Corcoran. You might not be able to score a townhouse, but there are thousands of apartments on the market—and if you’re willing to compromise a bit on size, you may be able to snag a deal.

“We are definitely in a buyer’s market right now,” says Carol Staab, a real estate broker at Douglas Elliman.

So what do you need to know if you want to buy a home in NYC? This guide hopes to demystify the process and act as a helpful manual, for both first-time buyers and those looking for some extra guidance.

How much do homes cost in NYC?

Short answer: a lot.

The median price of homes currently listed on the market is a whopping $825,000, according to Zillow. In October 2018, Manhattan home prices saw the largest year-over-year price drop since the 2008 financial crisis, dropping 1.8 percent in the third quarter of 2018, compared to the same time frame in 2017, according to StreetEasy. Manhattan homes cost just over $1.1 million and Brooklyn homes cost $726,874, according to StreetEasy’s Price Index metric, which indicates stagnating prices.

Meanwhile, Queens has seen home prices skyrocket. StreetEasy’s price metric puts homes in the borough at $536,028 in 2018, which is a 7 percent increase from 2017. In the summer of 2018, two Queens neighborhoods saw median sales prices cross the $1 million mark for the first time ever. Real estate experts predict that Amazon’s decision to open its second headquarters in the borough is only to going to push the prices up further.

“Queens has been the outlier in the sales market with prices rising at a consistently faster pace than in Brooklyn or Manhattan while remaining relatively affordable,” Grant Long, a senior economist at StreetEasy, told Curbed.

Overall, NYC home prices have bounced back significantly since the 2008 recession. However the city is being flooded with a record number of homes, and experts contend that this will prompt prices to drop, particularly in Manhattan and Brooklyn. Both Staab and Geller said that the growing inventory will translate into further discounts and price reductions in the coming months.

Why is it so expensive?

The fact that New York City is so damn expensive isn’t a recent phenomenon—the city has remained a bastion of wealth for over a century now, despite the ebbs and flows in the marker over the decades, real estate guru Jonathan Miller told Curbed. (You can read more about his thoughts on this here.)

The most recent push in pricey real estate occurred following the financial crisis in 2008, as the markets began to recover, Miller says. Capital poured in from across the world that prompted developers to go on a building spree. With the limited amount of space available in the city, the high cost of construction, and the expensive land values, developers choose to build luxury developments—like the developments on Billionaires Row—and in turn drove up prices citywide.

“New York City has always been affordability-challenged, but this most recent housing boom has only exaggerated it further,” says Miller.

Being the cultural capital of the world also holds a certain amount of cache, says Corcoran’s Geller. “There is a premium for that,” he explains, “and historically, people have been willing to pay the price.”

What kind of homes can I buy in NYC?

There are several types of homes available for potential NYC buyers:

Condo: When you buy a condo, you have full ownership of the apartment, and some part of the building’s common areas (e.g., the gym). Though the condo building will have a board, it won’t be as involved as a co-op board, and owners can easily rent or sell their home when they chose to. Condos are usually a good option for those who aren’t looking for a long-term investment. On the flip side, they’re typically more expensive—owners can be asked to pay more common charges depending on the amenities in the building—and in NYC, they are quicker to fly off the market, says Geller.

Co-op: These are ideal for people looking to make a long-term investment in a home. In a co-op building, owners get a share in the co-op association, and all the shareholders together own the building and its units. Co-op boards play a big role, and can determine whether you can rent out your unit or make major changes to the apartment. Co-op boards also play a large role in determining who gets to own in their buildings, so it can sometimes be hard to snag an apartment even if you have the means. NYC’s co-ops are generally older compared to condos, and some—like the Upper West Side’s San Remo and Dakota—have celeb owners, which means you can expect a much stricter application process. However, co-ops are more plentiful in the city, and can often cost less than condos.

Townhouse: A townhouse is typically a three- or four-story building that is adjoined with other buildings on a block; it can serve as a single-family home or have multiple apartments spread out over its floors. While townhouses are narrower than detached homes, they often have backyards and rooftops, and offer more privacy than an apartment. They also tend to be pricey, with townhouses in many neighborhoods asking more than $1 million (and as much as $84 million, depending on the house).

Fully detached home: These types of houses are harder to come by in Manhattan—the Frick, which is now a museum, is an example of the detached homes that were a mainstay in Manhattan in the 19th and early 20th century—but they are relatively easy to find in outer-boroughs neighborhoods like Ditmas Park and Forest Hills. They’re often wider and more spacious than an attached townhouse, and will come with plenty of outdoor space to boot.

Loft: it’s tricky to define a loft in NYC today, as many new ones have been built to recreate the atmosphere of the original ones. But typically, lofts are spaces in former industrial or manufacturing buildings that have been converted into residential spaces. They are notable for their high ceilings, large windows, wide open spaces, and minimal interior walls. Most of the original ones can be found in neighborhoods like Tribeca, Soho, and Williamsburg.

Should I rent instead of buying?

Most people who move to New York prefer to rent due to the exorbitant cost of purchasing a home (renters constituted over 65 percent of the city’s population in 2016, which is up from 60 percent in 2006). But if you plan to live here long term, it may prove more beneficial to buy rather than rent, especially considering the high cost of renting in NYC.

There are also several neighborhoods in the city—the East Village, West Harlem, and Kew Gardens are just some examples—where it may make more sense to buy, since you’ll break even on the cost of your investment in fewer years. But there’s no one-size-fits-all answer; ultimately, your financial situation and personal preference will dictate whether you rent or buy.

When is the best time to buy?

While the best time to buy in the rest of the country is toward the end of the summer, in NYC the ideal time is usually is usually the spring or the fall. Springtime is generally more competitive, but that also means buyers have more to choose from, since spring is typically when many new developments (both condos and co-ops) enter the market. In the fall, buyers are likely to score better discounts—there’s often a surplus of apartments on the market, leading sellers to lower prices. StreetEasy estimates that the best times to buy are between April to June, and between September through October.

The worst time to buy is the winter months—December through February to be precise—since during this time, there are fewer listings on the market, and as a result buyers are less likely to score any type of discounts.

How much of a down payment will I need?

The down payment is one of the biggest factor buyers have to consider while making a purchase. The lower your down payment, the more likely that you’ll have to pay higher interest rates and potentially incur other costs in the future, according to StreetEasy. Furthermore, the lower your down payment, the less likely you are to find a lender for your home loan.

A 20 percent down payment is considered the benchmark, and being able to meet that threshold will greatly increase your chances to acquire a loan and lessen your interest rate. It is possible to find homes where you pay a lower percentage of down payment, particularly with some of the new condo buildings in the city, both Geller and Staab told Curbed. With lower down payments you will have to consider other factors, like getting a private mortgage insurance to bail you out in case of a default.

Thanks to Federal Housing Administration (FHA) loans, you can also pay as little as 3.5 percent, but there aren’t that many FHA-compliant buildings in the city—and most are located in the outer boroughs, which is a factor to consider.

You can also try your hand at income-restricted apartments located in Housing Development Fund Corporation (HDFC) cooperative buildings throughout the city. They work similar to a co-op building in that the board will ultimately determine who gets to live there, but the apartments are reserved for low- and middle-income individuals and families. The sales price on these units can be no more than 165 percent of the area median income, according to city guidelines. The income restrictions change depending on the apartment type and the size of the family living in each unit. The downside to HDFCs is that they can often require higher down payments or all-cash deals. Here is a list of currently available units.

In December 2017, the city introduced new programs to make homeownership more affordable in the city. Open Door will finance the construction of condos and co-ops for first-time homebuyers earning between $69,000 to $112,000. The program is expected to create 1,300 new homes over the next eight years. For those earning up to 80 percent of the area median income, the city also offers an assistance program that provides up to $40,000 for a down payment or for closing costs.

Should I get a broker? What about a lawyer?

You can buy a home without a real estate agent or broker, but it’s probably better that you hire one, especially considering the highly competitive market in New York. Your broker will help you secure the best possible deal, and can assist you in bargaining for concessions. Brokers can be especially helpful when looking to purchase in a co-op building in NYC, as they will be more familiar with the requirements for that property and be able to give you a better sense of the ideal candidate. What’s more, you don’t have to pay a broker’s fee when it comes to sales. That money is usually included in the sale amount and split between the broker representing the seller and yours.

Getting a real estate lawyer is even more critical in NYC. Unlike other parts of the country, buyers here need to draw up a contract in order to finalize a sale, and unless you’re familiar with the law, this is going to be a steep hill to climb. Your lawyer will also be able to better advise you about potential concerns in your new building or home—noise complaints, building violations, and the like—as they go through the paperwork for that property. Typically both the buyer and seller in NYC have legal representation, and as a buyer, having a lawyer can ensure that you’re not getting fleeced by the seller. Fees for this type of work can range from $1,000 to $5,000.

Should I get pre-approved?

That’s a definite yes. If you’re working with brokers to find a home, almost all will insist you have a pre-approval letter from your lender before they start scouting homes for you. Pre-approval tells sellers that you’re serious about a purchase, and will greatly increase your chances of securing a sale.

A pre-approval letter is created by your lender based on your income and your credit score, and is usually prepared in under 30 minutes. It’s probably better to get pre-approved than pre-qualified, because the latter provides only a range for the amount you would qualify for a home loan, whereas the former gives you an estimate, which brokers and sellers will prefer. Overall, this process will also help ensure you’re actually ready to buy a home.

In terms of what sellers are looking for, particularly co-op boards, it’s strong financial records, according to Geller. The most important factor is your bank’s approval, and this can be secured through having your finances in order. You’ll also get a leg up if you show you’ve been at the same job for a few years.

Will I get into a bidding war?

Bidding wars aren’t as common as they used to be even just two or three years ago, says Geller. A few high-end, trophy properties may still see major bidding wars, but for the most part, bidding wars are on the decline, especially in Manhattan.

If you do, however, find yourself in a bidding war, there are different ways to come out on top. One of the key factors for success is knowing the neighborhood you’re buying in, and then potentially offering more than the asking price based on comps (comparable sales). Other factors, like being flexible about your closing date and your move-in date, can give you a leg up. A good old-fashioned personalized letter to the seller can’t hurt, according to Staab, especially if the seller is a long-term owner or is invested in the property.

How long before I can move in?

The length of the period between signing a contract and actually closing on the property is very much a case-by-case situation. Some estimates say it takes about 90 days from when the contract is signed to when you get possession of your home, but it really depends on a variety of factors. Buying a condo versus a co-op, getting pre-approval from your lender, the real estate lawyer you’ve hired—all of these factors can play a big role in the amount of time it takes to secure your home. Condos can usually be secured within to 30 to 45 days, and co-ops (due to the board approval process) can take between 60 to 90 days.

What can I expect at a closing?

Usually a day or two prior to closing, you get to do a walkthrough of the property. According to Staab, this is the time to note anything that might be amiss or that you’d like addressed—you can provide your broker with a checklist of these concerns.

Closings themselves can usually take a couple of hours because as the buyer, you have to sign a number of bank documents. You don’t really have to bring anything to closing per se, aside from government-issued ID (and a checkbook if you plan to pay that way), because by this point all your documents will already have been vetted by the seller, Geller told Curbed.

Your broker and your attorney will typically accompany you to this closing, and make sure that all the documentation is in accordance with what you and the seller agreed upon, before you can get to the signing of documents.

Closings can be costly affairs as well. Costs will vary based on the down payment you’ve put down and your mortgage rate, but at this time, you will have to pay attorney fees, mortgage fees, and a move-in cost. It’s hard to estimate an average price because it depends entirely on the cost of the apartment, and if it’s a co-op or a condo; expect to shell out thousands of dollars.

And once that’s taken care of, you can get down to the real work—getting settled in your new home.

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