One first-time buyer's grueling—but successful!—bout with all-cash bids
In January 2013, first-time buyer Martina started searching for a two-bedroom apartment with two bathrooms, a balcony, a washer/dryer and a doorman, if possible, on the Upper East or Upper West Side. However, she quickly realized that with her $1 million budget, two-bedrooms were hard to come by. So she focused on large one-bedrooms, specifically in the familiar Upper West Side, where Martina was renting a small one-bedroom. Her search was difficult and, although she was preapproved for a mortgage, she faced an uphill battle bidding against all-cash buyers. Here's how she did it:
When I began looking, I was shocked at how impossible it was for a working professional to buy in New York City. I realized pretty quickly that having a secure, well-paying job means very little in Manhattan’s real estate world, especially if you don’t have $1 million in cash and you’re a first-time buyer.
I looked at a new construction apartment in Hell’s Kitchen, a two-bedroom co-op sponsor unit requiring a total renovation, two adjacent one-bedroom apartments that could be combined into a large two-bedroom, a large one-bedroom with 1.5 baths in the Columbus Circle area, as well as multiple places in the Lincoln Center area. Some Sundays, I went to three or five open houses.
But I ran into roadblocks like bidding wars, apartments being sold before I could even get there to look, agents not willing to accept my offer, and a lack of inventory. I was most surprised by how much liquidity one needs after closing to be able to buy a co-op in Manhattan. Building requirements vary, but many expect buyers to have a minimum of one year’s mortgage and maintenance in reserve after closing.
All in all, I probably made five or six offers. The most disheartening was an offer for a one-bedroom co-op on the Upper West Side where my friend's husband sits on the board. I thought I could get an offer accepted because I knew someone. The apartment was completely renovated with a spacious kitchen and bath. It had no washer/dryer, but the basement’s laundry room was new and clean. The building did have a full-time doorman, which was a bonus.
Before the apartment was on the market, I offered the asking price of $825,000, but the seller practically ignored my offer. She didn't like that I wasn't able to buy in cash, and she claimed that the board would never approve me because I didn't have enough reserve funds. But she didn’t give me the chance. She wouldn't counter or take my offer to the board. My friend's husband even spoke with her, acting as a reference for me, but still. She was willing to take the risk of listing her apartment to see if she could get an all-cash offer.
She listed for $849,000 and soon had a bidding war on her hands. She opted for an all-cash deal, which is what she’d wanted all along. The buyer ended up paying higher than asking price and the apartment sold for over $900,000.
I almost gave up, but my broker just kept sending me new listings and encouraging me to continue looking. Having an honest broker is extremely important. He was able to take me through all the steps and nuances of the real estate market in New York City.
Finally, just before the holidays, luck was on my side, and I came across a co-op sponsor unit that didn’t require board approval. The sponsor was very flexible and only cared that I was approved for a purchase up to $1 million. The apartment was in the West 80s, close to Riverside Park. It was a gut renovated two-bedroom with 1.5 baths, originally listed beyond my price range. We negotiated, and I bought it for $1.075 million. The sponsor didn’t care about reserve funds. I didn’t need the usual year’s worth of mortgage payments that many co-op buildings care about. All that mattered was that I could secure a mortgage, which I had no problem doing.
I moved in a few months ago, and I’m still getting settled. I like the space and especially the location on the Upper West Side.
Related:
Everything you always wanted to know about sponsor units but were afraid to ask
What 8 first-time buyers wish they had known
6 ways to beat an all-cash offer
