Sunday, April 10, 2011

The house chronicles, part I

I've been saying for months that I would write about the nitty-gritty of buying an NYC condo -- something I knew nothing about before we started. So here goes ...

Depending on when you start the clock, it took either eight years or eight hours for me to find the apartment we decided to sink our life savings into buying.

My spouse and I have been together for just over a decade, and I've had house itch for most of it. I like permanence, I like decorating, and I wanted to own. But we were caught in the Catch-22 of New York City real estate: Because it's expensive, down payments are stratospheric. During the boom years, when anyone with a pulse could get a minimal-money-down mortgage, the prices were out of our reach. When prices crashed, underwriting tightened. Saving 20% -- a six-figure sum -- seemed hopelessly impossible. (We are also crap at saving. We shouldn't be. But we are.)

When I went home to Maryland for Christmas at the end of 2009, a friend filled me in on the apartment he'd just bought in Baltimore with the help of an FHA loan. That meant a down payment of just 3.5%.

New York's housing market is unlike any other, so I assumed that option wouldn't be available here, but when I started Googling, it turned out it was. You can't get an FHA loan for co-ops (which account for a vast chunk of NYC real estate), but over the last decade the condo stock has increased a lot. And not only were those eligible for FHA loans, developers were actively pre-qualifying their buildings for them.

Because I'd had house itch, I'd idly window-shopped for apartments for years. I'd gone to a dozen or so open houses in my neighborhood, constantly scoured Brownstoner and Streeteasy, and even kept a list in my Palm of all the features I wanted in an apartment. After so many years together, David and I had a pretty good idea of what we needed and what we wanted.

My non-negotiable list: "Two bedrooms, a decent kitchen, a dishwasher, a washer/dryer somewhere in proximity, and no more than a 45-minute commute to midtown."

My 'this would be my magical unicorn apartment' list: "Two-bedroom two-bathroom duplex with a terrace or backyard, eat-in-kitchen, washer/dryer, short commute, good light and maybe a fireplace." (Remember, that was my 'ha ha yeah right' fantasy list.)

So when I decided to go shopping for an apartment we could get an FHA loan on, I had a reasonably solid idea of what I was after. Sunday is New York City's open-house day. On the first Sunday in January, I made a list of about a dozen places to check out, grabbed my camera, and set out into the freezing weather.

(I was on my own because David hates apartment-hunting. "Just tell me when you find something good" was his approach.)

The first places, all in and around the Park Slope/Prospect Heights border we were then living on, were not good. Park Slope is a neighborhood of brownstones, and all the condos on my list in the area were low-rise places in small developments. Great in theory, but it quickly became clear that almost everything in the area had the same drawback: Constrained layouts. Because the buildings were mostly brownstone-sized, the apartments tended to be long, railroad-style corridors.

That meant cramming things into odd places in odd ways. One apartment didn't have room for a full-sized stove -- it looked more like a built-in toaster. Another had a large finished basement where the bedrooms were, but a main floor that was maybe 50 square feet. The nadir of the afternoon was a "duplex" with no stairs -- it had a hardware-store ladder connecting the tiny storage-area-like top floor. When I asked the broker about the stairs, she said nope, the developer had no plans to add any. "The buyer is free to do that!" she answered cheerfully.

Discouraged, I stopped in next door at Chocolate Room for a hot chocolate and a reconsideration of my list. I'd tromped through all my candidates in Park Slope and Prospect Heights, the neighborhoods we'd hoped to stay in. I had about two hours left before the day's open houses ended.

There was one other neighborhood on my open-house list: Downtown Brooklyn, an area I'd only been a handful of times. It's just 10 minutes by subway from Park Slope, but of an entirely different character. Park Slope is trees and brownstones; Downtown Brooklyn is a commercial area only recently rezoned for residential development. That development has been of the mega-building variety: The area has about a dozen condo projects, most in buildings with hundreds of units.

But because there's so many condos, there's lots of open houses, and I had two buildings on my list of places to check out. One called The Belltel had an open house that ran till 3pm, so I started there.

... and liked it way more than I expected to. After looking at so many apartments jammed into Park Slope brownstones and brownstone-sized lots, it was a sea change to walk into a giant building with comparatively sprawling layouts. Belltel takes up most of a city block, and its apartments were wide and deep. Every single one had a washer/dryer -- an unimaginable luxury to me, after 10 years of trekking to laundromats. The building's Art Deco lobby was a giant step up from the utilitarian tenement entryways I was used to.

But what dazzled me the most was the space. I saw four or five apartments, most in the 1,000 to 1,200 square foot range, and all with at least two (and in some cases, three) bedrooms. The asking prices were slightly above our range, but only slightly, and I was pretty confident they weren't expecting to get the asking price. The apartments had hardwood floors, open kitchens with granite countertops, walk-in closets and even, in a few units, built-in wine fridges. I'm a wine fiend who has often fantasized about turning a closet into a wine cellar, so that perk definitely caught my eye. But I didn't let myself even consider it: I tried to keep my sights trained on the less-expensive, more-realistic units.

Before I sell this as NYC's Last Great Real Estate Steal, I'll note that Belltel has one giant red flag: Windows, or Lack Thereof.

The (landmarked) building is a converted New York Telephone headquarters. Built around 1930, it's big and deep and was never designed to be carved up into residential apartments. The layouts vary widely, and a few (pricey) floors near the top have more conventional apartment designs, but most of the lower floors are filled with clever architectural kludges. Many of the "two bedroom" and "three bedroom" layouts are technically studios (or, if you want to sound fancier about it, lofts), because the apartments have just one wall of windows, in the living room.

That's a love-it-or-hate-it thing. I definitely understand when apartment-shoppers check out the building and head right back out, muttering "are you kidding me!?" But it didn't really faze me. In our decade of NYC apartment surfing, Dave and I had mostly lived in basements and railroads; our current apartment didn't have a bedroom, so we slept in a breakfast nook three feed from the fridge. "Natural light" was a hypothetical concept to me.

Just to be sure I wasn't jumping at the first life preserver, I left the Belltel open house and tromped about three blocks north, through the intensifying snowstorm, over to another FHA-financing-available new condo, the Oro. This one has a worse location (farther from the subways, across traffic-clogged Flatbush Avenue), but amazing views. They cleverly put the sales office on the 21st floor, with fabulous views over the Manhattan Bridge. I was somewhat smitten.

But after half an hour of seeing what the more-affordable, lower-floor apartments were like, I'd sobered up. Walls of giant windows look amazing, but -- we have books. Vast numbers. We didn't need fabulous amazing unaffordable views, we needed walls for bookshelves.

Conventional house-hunting wisdom probably says you shouldn't pick a place the first day you look. But I've always been terrible at small decisions (I can spend an hour agonizing over a menu) and quick at big ones. I picked my career when I was in middle school and got engaged to David four months after I met him; so far, those impulse choices are working out just fine. Belltel felt like a place I could see us living in.

So, half frozen, I hopped the subway back home to Park Slope, took David out for dinner, and announced that I'd found an apartment we should buy.

Monday, January 31, 2011

Your greatest investment, and your greatest albatross

Last year David and I pulled off a financial trick I thought we never would: Buying an apartment in New York City. There's a ton I learned along the way, and I've been meaning to write up the full story, as reference for those who are also taking the plunge and trying to decipher the cryptic process.

But there's a certain irony in finally starting to tell the story now. One of my closest friends called this afternoon to talk over a big financial decision: She's going to strategically default on her mortgage.

She and her partner bought their place right before prices peaked, at a time when they felt their only option was to buy a compromise "starter house" they didn't love or be priced out of home ownership forever. But right after they bought, prices started plunging -- and my friend lost her job.

With just one income and a significantly underwater house, they easily meet the guidelines for a loan modification, and my friend has applied for one, twice. But because they're still eking out the monthly payments and haven't gone late, the bank isn't interested in discussing a mod.

And my friend has had enough. Keeping up on the house payments means they have no money left for any kind of savings, including retirement savings; now, facing five-figure bills for needed maintenance and local housing market forecasts that suggest their house won't get back to the break-even point for another decade, she's decided to write off the sunk costs, let the bank come take its collateral, and move on.

Meanwhile, my best friend is also dealing with an albatross house -- one her soon-to-be-ex-husband fought to keep when they split, but couldn’t actually afford and promptly started missing payments on. Two years later, the foreclosure drama keeps dragging out.

I'm still thrilled beyond belief about my apartment, and this week I'll start posting the blow-by-blow tale of our 87-day warp-speed journey from making an offer to taking possession of the keys to our new home.

But my friends' stories are a sobering daily reminder of just how damn fraught the whole thing is.