Buying a home in NYC

NYC real estate is unique. Throw out everything you've heard about buying a house, and ignore anyone who hasn't specifically researched what the process is like for NYC. Even other major cities (such as SF, LA, Denver, or Seattle) are not comparable because of how long the NYC market has existed with its current level of density. Townhouses and condos may have some overlap with other parts of the country, but still have additional quirks, and co-ops are rare outside of NYC.

I had the luxury of buying a house during one of the slowest markets in recent history, mainly searching between July and September 2022. I was also searching at the fringes, on the outskirts of what a lot of people would consider "in the city" (Brooklyn, south of Prospect Park) and on the absolute low end of the market. As a data point, my price ceiling was $450,000; a figure most would figure is impossible to find in NYC. But I found one! In my search, I toured a a good dozen properties in my price range, and ultimately made an offer well below my max budget.

BrickUnderground and Brownstoner are great resources, with good overviews of what to expect.

Broadly, there are several phases to a serious search:

• Research
• Neighborhood selection
• Home selection
• Touring and submitting an offer

• Closing

  • Submitting an offer
  • Completing a deal sheet
  • Due diligence and board interview
  • Final Closing

Don't underestimate the research needed to make an informed decision on what home to buy. These are my notes, collated into a form that I hope will be helpful to anyone who stumbles across them, compiled after seriously searching for about a year as my finances and criteria settled.

Zillow, Trulia, and Redfin might be great in the rest of the country, but they aren't set up for the NYC market. StreetEasy is among the best options for NYC, with accurate data and good search controls (like filtering to be near a specific line). You can save searches (and find them later in "My Activity") to get notifications of new listings coming on the market. Do this months before you intend to buy so you can get a sense for how the market is moving and how quickly you'll have to jump on a home you love.

Despite being among the best, the notification options for StreetEasy are still pretty garbage. It took me a while to figure out the UI well enough to get the kinds of notifications I wanted, and there was still a lot of noise to sort through. The approach I found most effective was to draw a custom search area with a max price about 20% above what I was comfortable paying, and then pay close attention to how the market flows in that area.

If the market is particularly hot, scout around for a real estate agent who will stay on the ball for you. However after talking with several agents, telling them my criteria, and receiving email updates with new homes from them, I found that I could more quickly find new homes with a well-crafted set of StreetEasy search notifications. I heard that agents can sometimes find homes before they get onto the market, but I didn't find any homes that way.

I found an unusual source of information to be absolutely essential: The Department of Buildings records search. You can search for any address in the city and pull up a list of permits and complaints. Because I was trying hard to keep my budget as low as possible, I found a lot of buildings that seemed too good to be true. Permit and complaint records helped me find reasons for low prices, like a building fire 8 years before, a collapsed ceiling due to un-permitted bathroom renovation, frequently out-of-service elevators, and other issues. The Department of Buildings is serious in NYC, everything is so close together that they don't fuck around. Once you figure out how to navigate their records site, it has a wealth of valuable info.

One of the first major time investments you should make is to thoroughly explore a neighborhood you think you'd like to live in to get a feel for areas you think you may want to live. The NYC market moves quickly enough that one of the best ways to make a purchase is to narrow your scope into a specific neighborhood, block, or building, and get notified when somewhere that interests you becomes available. It's much easier to quickly evaluate a listing if you've spent a time in the neighborhood — the neighborhood where you'll be living for years — so the more you can learn about the area the better.

NYC housing markets are neighborhood specific. Access to transit, nearby parks, type of building, and character of neighborhood, all vary substantially in most parts of the city if you walk 10 minutes in any direction, and these all have a major influence on prices. Where you can afford is dependent on what you want to be proximal to and how much space you need. The amount of variation in neighborhoods can work to your advantage if you're willing to compromise a little; if a hip neighborhood is out of your price range, you may be able to find surprisingly affordable places within a 10 minute walk.

Since so much of NYC real estate goes through StreetEasy, one of the easiest ways to find a real state agent is just by using their "contact an expert" form. I did this several times for different properties to get tours, and kept in touch with the agent I felt the best connection with. I personally didn't find a ton of value in an agent before getting to an offer stage. Open houses are frequent enough that it isn't particularly difficult to tour the places you're interested in, but an agent may be able to help you schedule a private tour.

There are 2 agents working any particular deal, the buyer's agent and the seller's agent. You don't have an obligation to work with a particular agent, but it's rude to move forward with a different agent than the one that toured a home with you. I toured a lot of places I didn't expect to move forward on to meet different agents, and then reached out to one that I felt a connection with when I was ready to make an offer. I took agent selection very seriously, since the buyer's agent agent that closes the deal receives a percentage of the price as their commission. I wanted to feel good about the service provided, but also about who I'm choosing to win that commission.

Your agent's role is to help you get tours, find answers to questions about the building, and connect you with other real estate professionals. I found that I preferred being in charge of finding and touring homes, since that's the most personal and time consuming aspect of the search. Since I found that most homes are publicly available, I felt able to discover and plan tours. Having an agent I trusted available to help me schedule private tours if necessary was reassuring, but ultimately I didn't make much use of that. I also didn't find an agent the best source of information about a particular building or unit. The seller's agent should have more information, I found it best to ask them directly while touring.

While searching, in some areas of Brooklyn there were a good number of "HDFC" buildings. HDFCs are "Housing Development Fund Corporations," which were most often formed in the 70s and 80s (TODO) as a means of reclaiming and repairing abandoned residential buildings, turning them into affordable housing. As they're intended to be affordable, purchasing one comes with income restrictions; those restrictions made them off-limits to me, so I didn't research them much beyond that. (A funny quirk I noticed and asked around about: A portion of HDFC co-ops don't allow financing, meaning that a low-income person or family must pay cash, without obtaining a mortgage. I heard that it's a sign of serious financial struggles, an indication that the building doesn't want to allow a bank the access to their financial records a new mortgage would require)

Submitting an offer is where I found the most value in having an agent. My agent sent me a form asking for financial information and referred me to several lawyers who could help me with the rest of the deal process. The agent produced a "deal sheet" with the seller's agent, which gets the ball rolling on due diligence. Lawyer will pull information from the building (financial statements, board minutes, alteration and sublet agreements), negotiate the sale contract, and explain all of the above to you. I went with one recommended by my agent who charged a flat rate on the order of $3,000.

I was told to expect to spend ~3% of final price on closing costs for an all-cash co-op purchase. Your agent commission comes out of the purchase price and is not part of closing costs, which was a pleasant surprise for me. That percentage gets higher if you're financing, because the bank will have various fees around obtaining a mortgage (separate from down payment), and higher still for a condo due to higher building fees. BrickUnderground has some good background.

Manhattan property taxes are multiple times higher than in Brooklyn, on the order of 0.5% vs 2.5%. Property taxes in Manhattan are quite high compared to the rest of the US, but quite low compared to average in Brooklyn. In a co-op, taxes are usually included in the maintenance fees.

Terminology

Condos and co-ops are both apartments, as compared to a single- or multi-family home. The main difference is in how shared spaces and maintenance are operated. The major tradeoff here is control vs responsibility; co-ops have more control over how maintenance is performed, compared to a condo that's operated by a management company. Co-ops are cooperatives that own the entire building as a group, with no management companies involved. Condos are owned by a management company, with "monthly maintenance" being a charge from the company.

One of the downsides of a condo is that you won't have much control over maintenance, and the company may decide that it needs to up its profit margin. Private equity firms have been buying up these buildings in some locations and upping the fees. However, co-ops may have deeply entrenched co-op boards, and what control you're able to exert will depend very heavily on the politics of the building.

Condos have higher closing costs than co-ops. Co-ops are usually more restrictive on subletting policies, which generally makes them unsuitable for investment properties.

Townhouses are generally single-family homes, which are uncommon in the city and thus usually on the higher end of prices. Brownstones are a type of townhouse with a characteristic building facade.

A "sponsor unit" is the term for a brand new property that is being sold for the first time. Most sales are resales, though I was surprised at the number of sponsor units I came across. I believe gut renovations may be sold as sponsor units.

Renovations

There are 3 major categories of work: DIY, cosmetic renovation, gut renovation. Small things don't generally require a permit, but if it touches plumbing or electrical, it's not a small thing. Changing layout requires an architect to sign off on changes to make sure you don't break the building, and if the layout affects how many people can live in the unit, the Department of Buildings gets involved too.

Co-ops need board approval for all work done, full stop. Don't piss off the co-op board, they control the building where you live. Renovations in a co-op building are governed by the alteration agreement. There may also be a decoration agreement governing smaller cosmetic alterations.

A major concern for co-op boards is work that "pierces the membrane" of the building, i.e. that which would go from outside to inside the building. This is one of the impediments to updating windows or installing a mini-split system, as it a large condenser to be placed outside the unit, generally on the roof. (other concerns include putting something big and heavy on the roof)

Permits are important because a) there can be steep penalties, b) if your neighbors feel you're putting the building at risk they will report you. Housing units and building are all so closely positioned that work without a permit presents a real risk to the surrounding area. Your home flooding or burning because a neighbor skimped on required checks sucks. Helpful process notes

I inquired seriously about where the line is on DIY work, because I want to do a lot of efficiency things like insulating and soundproofing the walls. Online info I found indicated that you can open up the walls without a permit as long as you aren't messing with plumbing and electrical, but a large renovation project company I spoke with ($300k floor on project scope) said that if you open enough walls, it starts looking like a gut renovation. Gut renovations require extensive permitting, board approvals, and sign-offs from qualified professionals, like structural engineers and architects.

Administrative Code section AC 28-105.4.2 defines minor alterations and ordinary repairs where a permit is not required.