The Co-op Chronicles: The Mortgage Application

So, I had struck a deal on a 3 BR co-op on Cabrini Boulevard in Hudson Heights. The fun part was over: I had to apply for a mortgage.

Every time I apply for a mortgage—and this is my fourth time—I am amazed at how painful a process it is. A full proctological exam would be more entertaining. Not since I was divorced did I have to disclose my finances in such detail.

The mortgage broker took my application over the phone. I hadn’t expected this, so I was answering questions according to my recollection. She asked for my SSN, and within seconds had my credit report on her computer screen. It was a little frightening to think how easily a stranger could find out so much about me.

The good news was that my credit score is above 800, which is considered excellent. The bad news was that the report was showing me responsible for a bunch of credit card debt, as well as a house in Tampa, that I don’t own. All of that extra debt is almost certainly my ex-wife’s. Our names differ by only one letter. Many of those cards, as well as the home, pre-date our divorce.

The mortgage broker sent the completed application to my apartment by messenger, and it was waiting for me when I got home. There was also a self-addressed stamped priority mail envelope, in which I would return the signed application and all of the disclosure materials they’d asked for. As I had answered questions off-the-cuff, there were quite a few errors. I also saw that, of the six credit cards listed, only one was mine. There were too many entries that would have to be corrected, so I just downloaded a new form and started over again.

I had a week’s vacation coming, and didn’t want the application to languish for that long, so I stayed up till 4:00 a.m. gathering all my paperwork, so I could take it to work the next day and make photocopies. In case you’re wondering, this is what they needed:

• Copies of my last three months’ asset statements (checking, savings, stocks, mutual funds, 401(k), etc.)
• Copies of 12 months’ consecutive cancelled rent checks (front and back)
• Copies of my 2004, 2005 and 2006 W–2’s, 1099’s, K–1’s
• Copies of my 2004 and 2005 Federal 1040 tax returns (and all schedules)
• Copies of recent pay stubs covering a one-month period
  
• A letter from my employer breaking out my bonus/commission income for the last two years
• Copy of official government ID (driver’s license or passport)
• A check or credit card authorization for $750, covering the application fee ($350) and the estimated cost of an appraisal ($400)

Based on past experience, I’m sure they’ll want more—e.g., proof that I no longer own the Tampa home; proof that my ex-wife’s credit cards are not mine; and so forth.

With that, I was ready to go on vacation.

To be continued…

The Co-op Chronicles: The Deal

We’d had a whirlwind tour of open houses on Cabrini Boulevard. One 3-bedroom apartment seemed virtually perfect. It met all my criteria, and on top of that, had just been totally renovated. “Mint condition” is an over-used word in real estate, but in this case it was entirely accurate.

In Manhattan, where apartments not uncommonly sell above their asking prices, I felt that an offer 5% below the listing was reasonable. I called the agent who had shown us the place, and made the offer. Realtors in New York work in “teams.” The agent we saw was an underling. She had to pass the offer up the chain of command.

The head of the team called me back about an hour later. After asking a bunch of questions about my income and assets—to satisfy herself that the offer was credible—she agreed to present my offer to the seller. And she had a surprising piece of news: if my offer was accepted, the sale wouldn’t have to go through the co-op board, as long as I was putting 20% down, and the ratio of the mortgage payment to my monthly income was below 30%.

In New York, about 80% of the apartments for sale are co-ops. Normally, co-0p buyers in NYC must go through a ritual that is virtually non-existent anywhere else: board approval. The co-op board can block a transaction for any reason, or no reason at all. In extreme cases, co-ops have gone unsold for months, or even years, as the board turned down one buyer after another.

The most common reason for turn-downs is that the buyer’s financial resources aren’t solid enough. Co-op boards’ financial requirements are often far more stringent than banks. There are some high-end buildings that don’t allow mortgages at all: only all-cash buyers are accepted. There are many more that require down payments much higher than the typical bank. These days, you can get a sub-prime loan with as little as 5% down, but most co-ops require at least 20% (including the one I’m bidding on), and higher percentages are quite common.

Sometimes the board decides they just don’t want you as a neighbor. There are well known cases of prominent celebrities being turned down, because the board thinks the celebrity will bring a lot of commotion to the building. But there are plenty of cases where a seemingly innocent question (“When was the lobby last renovated?”) is enough to make the board think you’re a trouble-maker, and that’s all it takes. Boards in Upper Manhattan aren’t nearly as snooty as their counterparts further south. Still, board approval can never be taken for granted, and even in a simple case, it adds a couple of months to the process.

Back to Cabrini Boulevard: When a building makes the transition from rental to co-op, by law the existing tenants can’t be forced out. At the time 360 Cabrini Boulevard converted to co-op, the sponsor sold a bunch of tenant-occupied units to an investor, who has been collecting rental income and selling them one by one, as they become vacant. That investor obtained dispensation that his sales would be automatically approved, as long as the buyer met basic financial requirements. That’s why the unit I’m bidding on doesn’t have to go through the co-op board.

So, I placed the offer on Sunday night, and started waiting. Nothing moves faster than a realtor who has a bona fide customer on the hook, so I was surprised when Monday came and went, and I did not hear from her. It wasn’t till mid-day Tuesday that she finally got back to me with a counter-offer just $4,000 above where I had envisioned doing the deal. I wasn’t going to quibble over $4,000, so I said “done.”

I was buying an apartment!

To be continued…

The Co-op Chronicles: Open House

So, I was intrigued with Cabrini Boulevard in Hudson Heights. An ad in the Times showed an open house at 340 Cabrini Boulevard the following Sunday, so I decided to take a look.

Here’s what the listing said:

340 Cabrini Boulevard, #603. Note the view of
the Hudson outside the living room window.Simply priceless. Imagine drinking your morning coffee while watching the seasons change across the Hudson River along the Palisades. Imagine sipping a glass of wine from a private terrace and watching the sunset every night. Now imagine that it all belongs to you and that the terrace and views come with 3 bedrooms; a beautifully appointed kitchen with granite counters and stainless appliances; amazing closet space and 2 marble baths with a Jacuzzi in the master suite. This amazing home boasts one of the most spectacular views in Hudson Heights and in fact all of Manhattan! If you feel like expanding your universe, the roof deck is perfect for entertaining. Live steps from great restaurants and shopping, Fort Tryon Park and The Cloisters. This mint condition condominium is ready to move in today!!!

Floorplan at 340 Cabrini BoulevardYou can’t always trust a broker’s listing, but this one turned out to be entirely accurate. The apartment (listed at $995,000) was owned by a couple of Connecticut guys who used it as a pied à terre. It was impeccably decorated, and seemed to be very lightly used. The building, which is relatively new, is in terrific shape. The floorplan (right) was obviously designed to ensure that all three bedrooms would have river views. But because of the “angled” layout on the right side, the living/dining area is somewhat cramped.

The following week, I came back with my girlfriend. We had another look at the same apartment, and one with the identical layout two floors below. It was not as attractively decorated as the first one, and had a very lived-in look. However, it was listed for $50,000 less. As the agent put it, “Go upstairs and steal their decorating ideas; then, come down here and buy this one for less money.”

Exterior at 125 Cabrini BoulevardWe weren’t so sure, so we moved on to 125 Cabrini Boulevard, several blocks south. The building, Hudson Gables, is in the Tudor Revival style, one of the two dominant architectural styles in Hudson Heights, along with Art Deco.

The common areas, however, are much more dowdy looking than 340 Cabrini. We were amused to find that you had to go up two small stairs to get to the elevator. What’s the point of having an elevator, if you have to climb stairs to get to it? The broker conceded that the building had had “management problems” in the past, which she said have now been rectified. The building is on the odd-numbered side of the street, and thus does not have the spectacular panoramic views of the earlier apartment.

Floorplan at 125 Cabrini BoulevardIt’s worth looking at the layout, which in New York real estate parlance is called a “Classic 6.” The living room and dining room are both fairly large, but each of the two bedrooms has only one small closet. In the lower right corner of the floorplan is a “maid’s room.” Nowadays, most people would use it as a child’s bedroom or a guest room, but it is clearly much smaller than the others.

We found out that the co-op itself owns the unit, and has been trying to sell it for a while. They did a partial renovation, but it’s still very plain on the inside, and the bathrooms aren’t very attractive. The washer-dryer hookup is a definite plus: something seldom encountered in apartment buildings from this period. (It’s a converted shower stall.)

360 Cabrini Boulevard

We weren’t enthralled at 125 Cabrini, so we headed back up to 360 Cabrini, the last building on the side of the street facing the river, before you get to Fort Tryon Park.

There was a brief snafu, and initially we found ourselves at the wrong open house. We saw a 1 BR that looked like a flophouse. It was so icky that we could barely stand to look at it. We couldn’t imagine why someone who wanted to sell their apartment would leave it in such a filthy, cluttered condition. Wouldn’t the broker read the riot act to that owner?

We finally found the apartment we had really meant to see. The building has separate elevator banks serving the street side and the river side. The “lobby” on the river side is the fifth floor, because of the different elevation in back. The agent who showed us around was like Barbra Streisand without the singing voice. A real-estate version of Fanny Brice.

Here’s the listing:

River view from 360 Cabrini BoulevardIncredible Views Of The Hudson River! Come home to this lovely, just renovated Pre-war classic 6 room in a fabulous Art Deco building. This apartment features a large foyer, step down living room three bedrooms, two windowed bathrooms, all rooms have views of trees & the river. Apartment also includes a spacious windowed eat-in kitchen, generous closets, 9 foot ceilings, inlaid hardwood floors and tons of pre-war charm. Cabrini Blvd is located in Hudson Heights, a charming neighborhood with the beauty of the Cloisters and the convenience of the A train.

Floorplan at 360 Cabrini BoulevardIf anything, this write-up undersold the apartment. We were floored—especially after being so grossed out by the first unit we saw. It turns out the previous occupant was a long-standing tenant who pre-dated the co-op conversion. After she left, the owner did a gut renovation. It looks like it was built yesterday. The hardwood floors were completely replaced. The appliances still have plastic on them. The bedrooms are all full-size. There are eight closets, including two in the master bedroom.

Had I done the renovation myself, there are some things I would have done differently. The bathrooms have pedestal sinks. I hate pedestal sinks, as they leave you with no room to store the kinds of things that belong in a bathroom, are too big for the medecine cabiniet, but that you don’t want in plain sight. The owner also demolished the wall separating the dining nook from the living room. I would have left that wall intact.

Still, it is one of the better 3 BR layouts I’ve seen, is essentially brand new, has unobstructed river views, is 5 minutes’ walk from the 190th Street “A” station, and was listed at $995,000. I wasn’t going to find a better deal than that.

My girlfriend and I went for a long walk in Fort Tryon Park, then went downtown for coffee in Chelsea. After beating around the bush, I said abruptly, “I’m making an offer.” Just two weeks previously, I had no plans to buy anything for at least another year. Now, I was putting myself on the hook for almost $1 million.

To be continued…

The Co-op Chronicles: Cabrini Boulevard

So, I had decided that My Apartment—if it existed at all—was likely to be found on Cabrini Boulevard in Hudson Heights. A little background is in order, as even lifelong New Yorkers might not have heard of the neighborhood or the street.

Hudson Heights is the area bounded by 181st Street, Broadway, Fort Tryon Park, and the Hudson River. Like a number of Manhattan neighborhoods, the name is an invention of the real estate industry (think TriBeCa, NoLITa).

Historically, all of Upper Manhattan north of Harlem—that is, north of 155th Street was called Washington Heights. Brokers created the name “Hudson Heights” in around the mid-1990s, to create a separate identity for a neighborhood that was considerably more upscale, and less crime-ridden, than Washington Heights as a whole.

At the western edge of Hudson Heights is Cabrini Boulevard, formerly known as Northern Avenue. Some realtors call it the Park Avenue of Washington Heights. Most of the buildings along Cabrini Boulevard between 181st Street and 192nd Street are co-ops or condos. Many of them are built in the art deco style that pervades Washington Heights buildings from the ca. 1930s. The buildings on the western edge of Cabrini Boulevard all have unobstructed panoramic views of the Hudson River, the George Washington Bridge, and the Palisades.

At the northern end of Cabrini Boulevard is Fort Tryon Park, located on the site of a 1776 Revolutionary War battle between the 2,400-man Continental Army and 8,000 Hessian troops. (The Hessians won.) In 1917, John D. Rockefeller, Jr., purchased the site and hired Frederick Law Olmsted, Jr., whose father had designed Central Park, to design a similar park for Upper Manhattan. There are 67 acres of winding pathways, with spectacular riverviews. The Cloisters, an outpost of the Metropolitan Museum of Art dedicated to medieval art, is located within the park’s boundaries.

No one would call Hudson Heights a culinary magnet, but a number of respectable restaurants have appeared in the area. The New Leaf Cafe, in Fort Tryon Park, is listed in the Michelin Guide. Most of the other restaurants are concentrated on either 187th or 181st Street. 181st Street is home to the only Starbucks above Harlem.

On the map, Hudson Heights appears to be a long distance from midtown. But due to the unusually wide spacing of the express stops on the A Train, it is actually only a 20-25 minute ride, and seven stops, from 190th Street to Times Square.

The uptown “A” subway stations themselves, unfortunately, are in deplorable condition. They are safe, but haven’t been maintained since they were built in the 1930s. At 190th Street, the platforms are 240 feet below ground level. It is one of the few stations where you take an elevator to reach street level. The entrance to the 190th Street station, at the edge of Fort Tryon Park, was constructed at the same time as the park itself. A massive concrete and stone structure in the Tudor Revival style, it is listed in the National Register of Historic Places.

Due to the psychological barrier of being so far uptown and the historically dubious reputation of the surrounding area in Washington Heights, apartments in Hudson Heights have always been priced well below comparable apartments downtown.

When I entered my criteria—a true 3 BR apartment $1 million in a safe Manhattan neighborhood near the subway—into various real estate search engines, Cabrini Boulevard was what kept coming back.

To be continued…

The Co-op Chronicles: The Search

So I had decided to buy. What was I looking for?

• A “true” 3-bedroom apartment…
• In Manhattan…
• In good condition…
• Reasonably convenient to mass transit…
• In a neighborhood that won’t scare my 12-year-old son from Florida, or my 70-year-old mom from Michigan…
• For less than $1 million

In most cities, those conditions could be met with money to spare. In Manhattan, I was looking for a needle in a haystack.

Luckily, the search is considerably easier than the last time I went house-hunting, which was in the 1990s. Back then, you had to put yourself in a realtor’s hands. What you saw was totally dependent on what they chose to show you. You had no idea if you were seeing the best properties, or merely what they wanted to “push.” And it was nearly impossible to get a feel for a property without actually going to see it, so the search took up a lot of time.

Today, most of the major realtors advertise with The New York Times. Just go to the Times real estate page, and enter your search criteria (neighborhood, maximum price, number of bedrooms). The listings, too, are a lot more informative than they used to be. Besides the broker’s narrative description, you can usually bring up a floorplan, photos of the property, demographic information about the area, maintenance costs, and a lot more. You quickly find out whether what you’re looking for is realistic.

Obviously the listings are marketing, and can’t always be trusted. I mentioned that one of my requirements was a “true” 3-bedroom apartment. You might be wondering, what would a “false” one be? Well, in many cases what’s marketed as a 3-bedroom isn’t really. Perhaps the third “bedroom” is only a nook, which would require construction of a wall to become a real bedroom. Or perhaps it’s just a “maid’s room,” which means it’s only about half the size of a conventional bedroom.

Floorplan at 141 Attorney Street, #2CD

The listings also can’t give you a feel for the neighborhood. I saw a great listing for an apartment on Attorney Street on the Lower East Side that appeared to meet my criteria. That was before I actually went and looked at it. The Lower East Side may be gentrifying, but Attorney Street has a long way to go. Also, the building had a bar on the ground floor, and the unit for sale was on the second floor. On weekends, you can forget about getting any sleep.

After a while, you get accustomed to the standard euphemisms that realtors use to describe undesirable features. For instance, “Bring your decorator” means that the existing décor sucks. “Junior 3-bedroom” or “Convertible 3-bedroom” means that the third bedroom is less than what it should be.

Closets are a problem in many Manhattan apartments. Apartments with just one small closet in the master bedroom are quite common. You wonder: would any architect actually believe that two people’s clothes could fit here?

Anyhow, I quickly figured out that My Apartment did not exist in Manhattan below Central Park. Listings that initially appeared to meet my criteria always had something wrong with them. Otherwise, they would be more than $1 million.

Several listings in Harlem were compelling enough that I actually went uptown to look at them. Harlem is a beehive of upscale development. In 10 years, it could very easily be what Chelsea is today. But it isn’t yet. Even where the apartments themselves are compelling, I just can’t imagine bringing my 12-year-old son from Florida, or my 70-year-old mom from Michigan, to Harlem. It’s a lot better than it used to be, but you still need a lot of faith to live in Harlem.

One neighborhood consistently returned listings that met my criteria: Hudson Heights, and specifically, Cabrini Boulevard.

To be continued…

The Co-op Chronicles: Deciding to Buy

I’m buying a co-op. Over the next few months, I hope to chronicle the experience of buying a home in the New York market.

I live in a large studio apartment in Lower Manhattan. It actually looks like a 1 BR, as it has a “home office” (with a door that shuts) that I use as a bedroom. Legally, it isn’t a bedroom, because it has no windows. But as the leasing agent put it when I rented the place in 1999, “They’re not going to bang down your door in the middle of the night to see where you’re sleeping.”

A windowless bedroom isn’t such a bad thing. It is very quiet, and if you ever want to get sleep at an odd hour, the sunlight will never get in the way. It also means that if you oversleep, there’s no visual clue to whether it’s daytime or nighttime.

Lower Manhattan has been kind to me. With several subway lines within a few blocks of my apartment, I can be almost anywhere south of Central Park in under a half-hour. Amenities have improved considerably, as the Financial District continues its transition to a 24×7 neighborhood. For the amount of space I have, the rent has been reasonable by Manhattan standards, and it was quite good for the first few years after 9/11.

Despite all of that, I always considered this apartment a stepping stone to something larger that I would own, rather than rent. I didn’t expect to make that step for another couple of years. Then came the news that my apartment building is going condo, and it got me thinking.

The “insider price” for my 843 sq. ft. studio is $740,000. If you don’t live in New York, or haven’t researched the market, it will be hard to believe that that’s a good price. But it really is. For a unit that size, in good condition, in a doorman building near the subway, in a nice Manhattan neighborhood, you aren’t going to do much better. In many neighborhoods, you would pay a lot more.

However, buying a condo in Manhattan is a bit like buying a car: the instant you drive it off the lot, you’ve lost at least 10% of the value. For the car, it’s because of depreciation. For the condo, it’s because of steep closing costs on both sides of the transaction. Unlike a car, the condo eventually recoups that lost value. But unless the market is super-heated (which it isn’t right now), you have to hold on a few years. Practically every block downtown has at least one condo conversion, so I suspect that high inventory will put a damper on price appreciation.

I didn’t have to buy my apartment if I wanted to stay there. The condo conversion has a “no eviction” clause, which basically means I can live there forever, as long as I’m willing to pay market rent. The law also prohibits “unconscionable” rent increases, although it does permit very steep increases that are at the high end of “conscionable.”

With the very likely prospect of yet another rent increase this summer (when my lease is up), and very possibly a new and less friendly landlord (if I decline to buy the unit, and the sponsor sells it to another investor), I thought it was time to investigate my prospects elsewhere.

To be continued…