Saturday, November 12, 2005

This is not the post I expected to be writing: a tale of 3 apartments, part 1

I hardly know where to begin.
First, I'll explain my last two posts in a bit more detail.
I saw a small 1 bedroom condo in the aforementioned up-and-coming "SloGo" neighborhood. It was a 4th floor walkup in a building without any services or amenities, (no bike storage or laundry) and it needed at the very least some cosmetic work, but it had a nice layout, good closet space, windows in kitchen and bath, and an incredible open view of the NY harbor and lower Manhattan skyline. It was on a major road but in the rear of the building. The entire block behind the apartment was zoned for a mix of light manufacturing and residential use where you'd have to get a variance to build above 2 stories, so it was an okay bet that I wouldn't lose my view or have a lot of noise in the evenings. The asking price was $240k, which is way less that most studios in Park Slope, let alone 1 bedrooms. But for the location and quality of the apartment, it seemed high, so I thought I could get away with offering less, maybe $200k. I thought I might end up paying $210k or $220k.
But I started plowing through Property Shark data, and discovered that the seller must have paid about $110k almost 2 years ago. And there were no comparable sales at the price he was asking in that area. And I'd seen that brand new condos with upscale kitchens, etc, were going for less than he was asking in terms of cost per square foot. So I was vacillating about how much to offer. I arranged to take a second look at the apartment and was told he already had one offer on the table. I called a lawyer who was recommended to me by friends, who turned out to be great-- he talked to me for a while, and said he thought the asking price was out of line but that of course I could do whatever I wanted and he'd be happy to represent me. I think that was the tipping point thing that emboldened me to make a low offer of $175k.
My email to the seller (who was not using an agent) explained that I wanted to put my offer in context: that comparable properties had sold for X amount, that brand new condos were going for so much per square foot, that the neighborhood was up-and-coming but that the particular condo building would always be downscale and that it was on a main road and not a more desirable side street, that there were rezoning changes going on that might stall the pace of development of the area and in a flat or declining market, his place would be among the first to lose value. I added that I liked the place and appreciated its potential, and reminded him that I was very qualified financially and flexible about the closing date. I wished him the best and congratulated him on a great investment no matter how it worked out.
His response the next day was that I should consider a career as a real estate appraiser, and that his counteroffer was $195k!
Did I do a triumphant happy dance and feel like a kick-ass negotiater? Yes. I had visions of buying this place, sprucing it up a little or maybe a lot, living in it for a couple of years, staring out my windows at the Statue of Liberty, maybe even sitting on my fire escape to watch 4th of July fireworks over Manhattan... and then keeping the place to rent out after I had enough cash saved again to buy a better apartment for myself, which would have been in 5 years maximum unless I lost my job or totally changed my spending habits. And that I'd be making more money and be buying in a cooled-off market in 5 years, so I'd get a bargain that would allow me to buy a 3rd apartment in another 5 years and launch me on the path to real estate mogul-dom (as encouraged by 2cWorth and Nina of Sitting Pretty.)
But of course, I'd had my little bombshells about these other two apartments being possibilities again. I had not only the stress of considering one offer, but of weighing it against two other places, with pros and cons all over the place! What to do???
Tune in tomorrow for Part 2...


Anonymous said...

Madame X,

When I saw the listing on CL, I wanted to shoot you an email to let you know about this apt but decided against it thinking it was not a "good" buy. I'm sure you've done your homework and noticed that earlier this year, someone closed on apt 2R for $106k. I made an offer in 2004 for the apt for 100k and wouldn't budge. The broker then, who is the owner/seller of the apt you're looking at, presented the counteroffer of 106k to me but i turned it down. In hindsight, 106k was a bargain, but there was something about the location and building that i just wasn't too comfortable with. anyway, i know you think you got a great deal, and i don't mean to crush your hopes of this apartment. I simply wanted to present you other facts that you may have missed. How would you feel about paying 90% more for the same sized unit in the same building purchased less than a year apart. also, note that since the seller is also a broker, he knows the market and perhaps inflated the asking price to make it seem like a bargain if you made an offer 19% less than asking.

at 240k, that's ridiculously high. at 195k, i still think it's pushing it a bit.

i too live in an up-and-coming area.. and i feel that this part of 4th ave is far away from coming up. you're in a somewhat tough position right now, since studios & 1brs are the next 'hot' things, you'll be competing with more potential buyers for lesser quality products.

good luck.


Madame X said...

gravesend, did you look at the one that sold for $106k? Did it really face a brick wall and need total renovation?
thanks for the info!

Anonymous said...

madame x,

good thing you backed out. i don't remember the windows looking out to a brick wall. there was enough light in the apartment when i checked it out. total renovation? sure. but not more than 10k for DIY, or hiring a handyman. i just wasn't ready to do all that work.