While many 22-year-olds are looking to snag their first job and shacking up with a crew of roommates in far-out Brooklyn, one--Polly Mosendz--recently bought her first piece of property in Manhattan, a $250,000, 418-square-foot co-op in the Village.
Earlier this fall, she wrote about that experience in The Observer. Major Internet backlash ensued in publications like Gawker and the Huffington Post, where her experience was categorized as anything but “normal"--at least as far as coming up with a $50k downpayment at the typically paycheck-to-paycheck age of 22.
But to Mosendz, amassing the necessary capital was only a fraction of the challenge at hand.
"Buying an apartment in your early twenties is more than a matter of having the money to do so," she told BrickUnderground when we caught up with her. "It's a constant fight to be taken seriously by sellers, their agents, lawyers, financial institutions, and in the worst cases, even your own broker. All the money in the world doesn't matter if you don't have a good team on your side pushing the process forward."
If you're under 25 looking to make your property dream a reality, read BrickUnderground's guide to How to Buy a NYC Apartment and keep the following age-appropriate tips and tactics in mind:
1. Understand that your youth may work against you
While buying a property is in theory all about the financials, young buyers can expect that their age will work against them in certain parts of the process. Or as Mosendz told us, expect a “tedious balancing act of proving yourself over and over again” to brokers and sellers and eventually to a co-op board.
Even if you have money for a downpayment (typically 20-25% of purchase price) and a salary that will cover monthly mortgage payments and maintenance, a strong work and credit history takes time. Thus, experience sometimes wins out.
“I don’t believe that the market is meant to keep young buyers out, but I do believe that the seller—and the sellers’ broker—are going to take offers from the best qualified candidates. And more often than not, somebody who’s been in business for a long period of time and who’s got steady income and steady credit history and isn’t borrowing from their parents, is a more likely co-op candidate than somebody who is," says real estate broker Michael Signet of Bond New York.
Another potential issue for young buyers—albeit one that can be overcome—is the question of how serious they are about closing a deal, says Gary Malin, Citi Habitats’ president.
To show that you're committed to buying and have the financials to get things done, Malin recommends preparation and organization through and through. Have everything ready to go before approaching a seller or seller's broker so that you're taken seriously from the beginning.
“If you come somewhat disorganized to the process, it sends a message to them that maybe you’re not really going to follow through,” Malin says.
And then there’s the board approval process, the key to closing on a co-op.
Boards are likely not concerned by age per se, says Toni Kamins, who spent six years on the board of her West Village high-rise, nor are they necessarily worried that a youthful buyer is going to party all night. It's more that a board may wonder where you got the money from with only a few years of work history, and question whether you'll be able to make all of the monthly payments.
To offset these concerns, a co-op board might ask for some money to be placed in an escrow account.
To get board approval, Mosendz had a relative co-sign on the deed who is legally obligated to step in and pay her monthly maintenance if she ever defaults.
2. Get pre-approved for a mortgage
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Unless you're prepared to pay for an entire property in cash, you'll need to secure some financing.
Robbie Gendels, a vice president and senior loan officer at National Cooperative Bank, says that she can work with first time buyers who have a job, good credit, and the down payment. The down payment may come from parents, but the buyer alone needs to be approved for a mortgage, as Fannie Mae no longer allows a non-occupant co-borrower on a fixed rate mortgage. (Note that a co-borrower is allowed on an adjustable rate mortgage with a 25% downpayment.)
If you don’t have credit, you'll need to establish it before attempting to buy, as lenders today look for a credit score of 720 and above. You'll also needs to show some savings outside of your down payment -- enough for closing costs and about three months reserve -- which might include a kernel of a 401k, bonds, checking and savings.
In terms of the down payment, a down payment of 20% eliminates the need for mortgage insurance, and 25% will get you a better rate in today’s environment, Gendels says.
Get pre-qualified for a mortgage before you start shopping, at a price point that takes into account the monthly mortgage payment, mortgage insurance payments (if applicable) and maintenance or common charges.
3. Find a real estate broker who will work with you
So why do you want to work with a buyer's broker in the first place?
Having an experienced professional to walk you through the ups and downs of buying in New York City is helpful from a learning curve standpoint and to minimize any age-related bias you may encounter.
Mosendz searched without a broker for the first three months of her 14-month hunt. She wasn't taken seriously, she says.
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"At first, I went to a lot of random open houses by myself, without a broker at all. I was feeling out the market to see if there were properties that even existed in my price range that were in livable condition--I wasn't looking for much, just basic things like hot water and a toilet," she says. "When I tried to explain this to the seller's broker, they more or less blew me off as 'oh she isn't buying, whatever, not important'. Many wouldn't even show me the apartment without a broker, or would demand a brief description of my financials to be sure I was qualified."
After she began working with a broker, things went more smoothly. "It is much, much easier with a broker, especially a well connected one that knows what they are doing," Mosendz says
Not all real estate brokers are willing to work with a first-time buyer with a relatively modest budget, but they ought to be.
“Just because you’re going to buy something at the beginning entry price today, most real estate brokers are smart enough to realize that this is just the first of hopefully many transactions with you,” Citihabitats' Malin says, noting that a happy first time buyer will also likely send their friends.
Malin recommends finding a broker through a personal reference, as Mosendz did, eventually working with Marc Solomon of Douglas Elliman, whom she calls "an incredible agent for young buyers."
"I think that many first time buyers have a 'what if' moment--what if this one is the one, what if it gets away, what if our offer isn't quite right," she adds. "Marc helped me avoid a lot of 'what if' moments by being so diligent in his research, and understanding of what I needed even when I was frazzled."
4. Find a place you want to buy
Once you hit this stage of the process, you probably will already have a good idea what you want, be that a neighborhood, or a necessary amenity, like a doorman or elevator building, outdoor space or a dishwasher. But real estate broker Michael Signet of Bond New York, recommends some flexibility, too.
“We’re very rarely in a deal where there’s not multiple offers,” he says, adding that a young buyer with limited means shouldn’t “zero in on one property and make it all or nothing,” but should spread themselves out and make offers on multiple properties.
He advises forgetting about the hottest areas, like SoHo or TriBeCa, and also forgo looking at units that have just hit the market. Instead, consider areas like the Upper East Side, where there is a solid inventory of smaller units, and focus on properties that have been on the market for longer, where the seller is more likely to take a chance on somebody.
Check out any neighborhoods you're considering and get comfortable with what you want and where you're willing to live, so that when you find the right place you're ready to pull the trigger immediately.
“The more decisive you are, the more you overcome what someone may perceive to be inexperience in the transaction,” he says.
Mosendz was certainly decisive about what she wanted. She looked at about 100 properties, she says, and had a list of 20 questions she carried with her scaled from most to least important.
She wasn’t willing to compromise on the neighborhood and had other must-haves, like a bathtub and a live-in super. While she admits to being “very, very picky,” in the end, the list helped her narrow her focus and not waste anyone’s time.
“It eliminated the process of ‘I think I like it,’” she says.
5. Make an offer… and get it accepted
Overcoming inexperience in the eyes of the seller--and the seller’s broker--is a major worry for young first-time buyers. But all of this preparation should put you in a good position to close a deal.
“In the end, every seller really wants to get the best price, and they want to make sure that the person they’re dealing with, whether they’re a first time buyer or not, is financially capable of closing this deal,” Malin says.
When a buyer is committed to making a purchase and is realistic about what they can afford and where, a sale should come together.
“You just want to show someone that you’re prepared, you’ve got all your ducks in a row, and you’re ready to act,” Malin says.
6. Get approved by the board
Many New York City properties are co-ops, which means that a board must approve every buyer before a deal is closed. While some boards are pickier than others, most, like Kamins', just care about financials.
“We’re not going to discriminate,” she says, noting that her 120-unit building had a fair number of youngish buyers. “If your financials are solid, you’re going to get it,” she says.
Even with solid financials, Signet wants his clients to come to showings, and specifically board meetings, looking professional. “I don’t want them in jeans or tee-shirts,” he says, noting that a young buyer should always dress to be taken seriously.
In addition to solid financials, says Kamins, a board is just looking for somebody who is “going to make a good neighbor and who’s going to pitch in and become part of the community.”
7. Close the deal and enjoy your home
With the deal closed, it’s time to celebrate owning a piece of New York City property, no matter how small it may be.
While Mosendz says she’s found owning her own place scary at times (e.g dealing with surprise repairs, or when she thought she'd flooded her neighbors' apartment a few weeks ago) overall it’s been a positive experience.
"My toolbox has grown quite a bit, but I love it, because it is my toolbox and my apartment, and I am fixing it for myself to enjoy," she says. “I would never go back to renting now.”