Buying a Home in New York City

Barbara Weaver

New York University

Professor Julia Keefer

Writing Workshop II

October 31, 1998

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Abstract

Buying a home can be a daunting matter of considerable difficulty. This

coupled with finding the perfect home in the most populated city in the

United States, may make the task seem insurmountable. As rents

continue to increase, with no end in sight, people search for the

"American Dream," even though the cost of obtaining that dream are

skyrocketing housing prices. Is it still possible to realize the aspiration of

owning your own home and living close to work in modern day New

York, with a modest income?

Or, is it better, as Plato stated, "to live a life of austere simplicity,

without private property, for private property is the chief temptation that led

men to sacrifice public to personal interests. The happiness of both will lie

in their service to the community for it is happiness of the community as a

whole, and not of any particular class that it is the objective."(Plato 123-124).

Does not buying a home in a community make you feel part of that

community?

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Buying a Home in New York

Purchasing your own home is wrought with details but the investment

is well worth it. You may have started the process by obtaining the New

York Times Sunday Edition on Saturday for the tenth straight week in a row

to get an early peek at the Real Estate section, and scoured

real estate broker links, and talked to everyone that you can think of that

knows anything about buying a home and been to your umpteenth open

house. After all that, youíve finally found your dream home, now what do

If youíre the only one whoís made an offer, because everyone else is

still thinking about it, you may have the deal wrapped up before anyone

else has even made up their mind. If there is a large gap between the asking

price and what you offered, the owners may come back with a counter

offer. If this is still more than youíre willing or able to spend by a wide

margin, you can give them a non-verbal cue by making your next offer(s)

smaller and smaller increments away from your previous offer(s) rather

than going all the way over to their number.

A lot of times a seller doesnít want to take the chance of losing the offer

youíve made, because it may be the best one theyíve got, or even the only

offer at this point. There will be some momentum to come to a binding

agreement before very much time has gone by, especially if theyíre trying to

close on another house, which is usually the case. They canít buy their new

home until theyíve sold their current one. Theyíre already seeing

themselves in their new home and donít want to risk losing it because they

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canít come to closure on their old home.

A home can have all of the traits detailed by Virgina Woolf, in this

Passage from Moments of Being:

Your offer is accepted and the next step is to get a lawyer specializing

in real estate, if you donít already have one. You need to have a purchase

agreement signed by both parties, the seller and the buyer. Itís usually a

good idea to have a professional home inspection done before signing the

purchase agreement. This usually runs between $500 and $600. They

will check the boiler, the electrical wiring, the foundation and the roof and

the general structure for safety. The inspector will provide you with a

written analysis of their findings with recommendations for improvements.

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"It is very important to negotiate with the current owners what needs to

be repaired before signing the purchase agreement," says Zerline

Goodman, Esquire, a Brooklyn attorney specializing in real estate.

If what needs to be fixed is something like the following, you have a

more serious problem on your hands.

The sellerís real estate broker will continue to show the condominium

even though you have an accepted offer, until a purchase agreement is

signed. So until this happens, your condo is still at risk of going to someone

else. One caveat in New York City is that binders are not accepted. Your

full down payment must be received with the purchase agreement to be put

in escrow with the sellerís attorney. There is a minimum of 10% down

payment for condominiums. If you were in a bidding war with other

potential buyers, the amount of down payment is taken into account. No one

wants to see a deal fall through halfway through the process, so if one buyer

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is able to put more down than another, for instance 20% instead of 10%,

they have saved more and appear to have thought this through more

thoroughly, and are perhaps more serious and may be chosen over another

buyer. Some areas to explore in order to increase your down payment if

need be, are by selling stock, borrowing from your IRA, or if youíre

fortunate enough, receiving a gift where no repayment is required ñ this has

to be stated in writing and signed by both the donor and the recipient. Bank

loans and credit card cash advances are not allowed for your down payment.

This may not seem totally fair, but itís better than the following:

As late as 1967, in Shanghai, China, a family could be threatened and

thrown out of their home by their neighbors or even strangers with no

safeguards by police. They would be strong armed for having a bigger

space, ie four rooms for a family of six versus one room for a family of

eleven. They could be forced to exchange a home they owned with no

notice whatsoever, for an inferior two room home owned by the government

located on one floor shared by three families with only one toilet between

them. (Min 6-8).

Compare this with the very civilized upbringing of Virginia Woolf in her

home at 46 Gordon Square, Bloomsbury, England, in which it was a house

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of innumberable small oddly shaped rooms built up to accommodate not

one family but three." Instead of being uprooted, as Anchee Minís family

was above, "these three families had poured their possessions into this one

house. One never knew when one rummaged in the the many dark

cupboards and wardrobes whether one would discover Herbert Duckworthís

barristerís wig, my fatherís clergymanís collar, or a sheet scribbled with

drawings by Thackery which we afterwards sold to Pierpont Morgan for a

considerable sum. Old Letters filled dozens of black tin boxes. One opened

them up and got a terrific whiff of the past. There were hoards of china and

glass. Eleven people aged between eight and sixty lived there, and were

waited upon by seven servants, while various old woman and lame men did

odd jobs with rakes and pails by day. The house was also completely quiet.

Save for an occasional hansom cab or butcherís cart, nothing ever passed the

door One heard footsteps tapping down the street before we saw a top hat or

bonnet, one almost always knew who had passed. Here then 17 or 18 people

lived in small bedrooms with one bathroom and three waterclosets between

them." (Woolf 182-183).

This was complete contrast to Achee Minís world where one could be

pulled out of oneís bed in the middle of the night without warning. They

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had no sense of ownership of anything, not even themselves.

When you have a signed purchase agreement in place, fully

sanctioned by your lawyer, itís time to apply for a mortgage. Copies of

your bank statements, bank transfers, gift letters, W2ís, pay stubs, and tax

returns must be supplied to the potential lender. A credit report fee of

approximately $50 will also be charged at this time. You will receive a copy

of your credit report and will see why it is so important to pay a bill

immediately upon receipt and to pay off all charge accounts every month so

that things donít creep up in your credit report out of oversights.

It is best to compare overall costs, not just rates, when mortgage

shopping. Get a good faith estimate in writing from each potential lendor.

You might want to try a mortgage broker, along with calling various

lending institutions directly. You cannot lock a rate on condominiums and

co-ops past 45 days. So when you find the best overall cost of a particular

mortgage broker or bank, make sure you can lock at that point. Once you

pay all your commitment fees with them and if you still havenít locked, they

have no incentive to give you a competitive rate.

Rates can change every day and many times with a volatile bond market,

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theyíll change more than once a day. When interest rates go down, that

doesnít necessarily mean that mortgage rates will automatically go down as

well. Bond sell-offs occur frequently when this happens, which affect

mortgage rates. Thereís a mad rush to sell off bonds at the lowest interest

rate.

Average upfront fees in New York City are the application fee, $200,

appraisal fee, $300, and credit report, $50. Donít let everyone you go to

run a credit report on you because you will need to explain in writing to your

mortgage provider each and every inquiry on your credit report. When your

mortgage broker chooses a particular bank for you, the bank may also ask

for a commitment fee of 0.5% of the loan amount. Mortgage brokers donít

charge you for their service, they have relationships with certain banks and

therefore can get you a lower rate with their influence. The bank pays them

with a point on the amount to finance, usually between 1 & 2% of the loan.

They may get additional compensation in Yield Spread Premium.

Your lawyer will work with a title company to prepare the documents

for closing. Closing costs for condos and co-ops range from 3-6% of the

purchase price of your home.

It is also recommended to get home insurance which will

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range between $250 and $500 per year. You can use an insurance broker

for this, or buy a policy directly from the insurance company. A good

place to look for the quality of the various insurance companies is at the

If you find an insurance broker you like, he will also service any claims

you may have, which could be more responsive than going to a large

institution. It is highly recommended to get $1 million dollars of personal

liability coverage in addition to your specific needs for contents coverage

and additions and alterations. If you donít have insurance and there is a

fire, the condominiumís insurance does not cover your mortgage payments.

Here is another good reason to get insurance:

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-The Walkthrough ñ

The walk through takes place when the current owners have moved out all of

their belongings. The walk through takes place with the prospective buyer

and a representative of the seller. The buyer goes through the condo and

checks everything thoroughly, to make sure everything is in working order

and in good condition or the same condition as agreed to when the purchase

agreement was signed by both parties.

In the novel "Einsteinís Dreams," by Alan Lightman, a book with several

notions of time, it is clear what an important part the home plays in relation

to time and how important timing is. Each section of a village lives in a

different century. Each home is a snapshot of a certain moment in history

and each individual is stuck at a certain point in their lives. In another

excerpt, with the passage of time, comes increasing order. "In such a world,

people with untidy houses lie in their beds and wait for the forces of nature,

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to jostle the dust from their windowsills and straighten the shoes in their

closets. Clothes on the floor in the evening, lie on chairs in the morning.

Missing socks reappear." Or, imagine a world where there is no time, only

images. Sunlight, in long angles, through a window in late afternoon. An

old man in the kitchen, cooking breakfast for his grandson. A woman lying

on her couch with wet hair, holding the hand of a man she will never see

again. A bead of water on the windowsill. Or imagine a world where no

one has any memory, each person must consult their address book to learn

where he lives when it is time to go home at the end of the day.

Each of the above cases will not fly when youíre going through the

closing. You must remember and take care of every detail. Timing is

everything. If you donít want to be stuck paying for the door that is broken,

or the labor costs to repair the window sill after chunks of wood were taken

out when the airconditioners were removed, or a missing refridgerator shelf,

or even faulty switches or radiators, you need to notify your lawyer and/or

the current owners immediately before you close. Most people are fairly

reasonable when it is brought to their attention that this needs to be taken

care of. Usually an amount will be agreed on to cover the damages and

taken out of their lawyerís escrow account. A check will be mailed that also

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covers any extra days they stayed in what is now your home after the closing

date.

-The Closing-

The closing date is set at least two months in advance, typically. Those

present are the lawyers for buyer and seller, who can be assigned power of

attorney, if the buyer or the seller canít make it, the title closer, the bankís

attorney who is supplying the mortgage, both the buyer and seller or their

representatives and the real estate agent. She wants to make everything

goes well so she can get her check. She may have handled both the sale and

purchase for the sellerís new home and with the closings on the same day,

can make a very hefty sum at 6% each. The closing is held at the office of

the bankís attorney. The bankís attorney barely makes an appearance in

some cases. He has an administrator in the room handling the checks and

correspondence with the bank.

The real estate lawyers look at the check the bank has submitted to

purchase the home. It is less than the mortgage amount because they have

subtracted the bank fees from this amount. So the buyer must make up the

difference in the amounts due the seller. The buyer must also write a check

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to the bankís attorney, for on average $450. The pressure is put on from

both lawyers and the title closer is expecting you to write a check to the

title closer for $75-$100 as a tip because he gets paid very little from the

title company who contracts him, which is engaged by the buyerís lawyer.

This is customary in New York City. A check needs to be written to the

sellers not only for the difference in the bank check and the purchase price,

but also for taxes they have already paid for the quarter and for maintenance

charges on the condominium that they have already paid for the time period

when you take ownership. You also need to write a check for the

settlement charges to the title company and a check to your lawyer for her

fee. The seller pays the title transfer taxes.

The seller hands you the keys and you are the proud owner of your very

own home in beautiful New York City. Nothing can compare to the feeling

of investing in something, especially your own home and community. You

may be asked to be on the Board of your condominium association. "A

growing number of condominium, co-op and homeowner associations are

using the World Wide Web to communicate with residents. Residents,

board members and co-op and condominium managers can turn to a website

for up-to-the-minute information about community living. The site can be a

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central repository for publications, articles, "how-to" advise, court rulings

and real-life experiences of residents and board members dealing with just

about every conceivable aspect of co-op and condominium ownership and

management." (Romano)

In conclusion, Don DeLillo put it best, "Now I finally feel that Iíve seen

New York inside and out, just standing here in this space and looking out

through the window. When it rains out, it rains in." (87).

Works Cited

Ambest. Homeownerís Insurance. 9 Nov. 1998

Bodipo-Memba, Alejandro. "Housing Starts in October Jumped 7.4%."

Chase. "Buying your Home ñ Settlement Costs and Helpful Information"

C-6307 Rev. 8/97.

DeLillo, Don. MAO II. New York: Penguin Books, 1991.

Godson, Barbara. Personal Interview. 17 Dec. 1998.

Goodman, Esq., Zerline. Personal Interview. 11 Nov. 1998.

Huxley, Aldous. Brave New World. New York: Perennial Classics, 1932.

Kerouac, Jack. On the Road. New York: Penguin Books, 1955.

Lightman, Alan. Einsteinís Dreams.

New York: Warner Books, 1993.

Min, Anchee. Red Azalea. New York: Berkley, 1995.

Plato. The Republic. Trans. Desmond Lee.

London, England: Penguin Books, Rev. 1987.

Romano, Jay. "Your Home - Web Sites for Co-ops and Condos." New

York Times 21 June 1998. Late ed.: sec 11 p3.

Styron, William. Darkness Visible. New York: First Vintage Books, 1990.

Woolf, Virginia. "22 Hyde Park Gate." 164-177. "Old Bloomsburg."

201. Moments of Being. Orlando, Florida: Harcourt Brace