What Does the Home Buying Process Look Like?

The Weekly Recap

Mortgage rates ticked up again, consumer prices are rising at a faster pace in January, amount of homes under construction are at the highest level since 1978, remote work is costing Manhattan up to $12 billion a year, US is at risk of a debt default in July and CPI growth slowed to 6.4% YoY in January. US bank CEOs see economic pessimism is lifting, commercial leases are down 47% in NYC and there is over 100 million square feet of available space. Lets hope our political leaders can push through all the rezoning necessary to convert that into residential space. Bill Ackman also bets that our next president will be Strive Asset Management founder Vivek Ramaswamy.

What Does the Home Buying Process Look Like?

Buying a home can be a life changing decision - often times the biggest financial commitment an individual can make. That's why it is vital to have an investment strategy in place before jumping into the New York City or Hamptons real estate market. You'll need a buyer’s agent, a mortgage broker, and a real estate attorney. Follow my step-by-step process for a smooth, enjoyable, and successful purchase here in NYC. 

STEP 1: DETERMINE YOUR BUDGET

I always recommend our buyers to have a conversation with an experienced mortgage broker to help them determine what they can afford. Mortgage brokers can quickly tell you based off your level of income and assets what your budget can be. At this point, the mortgage broker will draft a “Pre-approval" letter indicating how much the bank is willing to lend you. This letter is also used when submitting an offer to prove to the seller that you are pre-approved by a bank and able to legitimately buy. Buyers who are not prepared with this step can often times lose out on properties because of delays in getting this letter which is why it is crucial to have this complete early on. This is also a great time to decide who will represent you legally in the transaction. You should always use an experienced Real Estate Transaction Attorney who does consistent business in the area and neighborhood you are purchasing in. 

STEP 2: UNDERSTANDING WHAT YOU WANT VS. WHAT YOU NEED

Once you know what you can spend, you will then need to find out what your money can and can’t buy you. Having realistic expectations is very important when searching for your next home, and working with abuyer’s agent can help you manage those expectations by educating you on the current inventory. Is location more important than the size and quality of the finishes? Do you need a doorman and other building amenities? Do you have pets? Will you need to sublet the apartment in the future? Transportation access? These are basic questions that you should be asking yourself as a buyer and future owner, and prioritizing what is most important. Whether your budget is big or small, you will always have to compromise somewhere in the process. 

STEP 3: VIEWING APARTMENTS

Often times, the more apartments you see, the more you learn about the above step. So the more you see, the closer you will get to finding that perfect apartment. Working with a real estate agent who knows the market and is able to show you the best options efficiently will ultimately save you time and lead to that “this is it!” moment. Most buyers see between 10 and 30 apartments before making a decision, and 9 out of 10 transactions in the city are closed with a buyer’s agent. 

STEP 4: SUBMITTING AN OFFER AND NEGOTIATING TERMS

There are major factors that play an important roll in the negotiating process: price, financing amount, contingencies, transfer taxes, flip fees, inclusions, exclusions, closing date, etc. Because the inventory is so tight, most sellers will have the upper hand in most of these factors - especially when there are multiple bidders. But understanding what your leverage is and why you are more qualified to purchase an apartment over another buyer can be the difference between securing your next home, or getting beat out. This is where your agent will advise you on what you need to do in order to get an accepted offer. 

STEP 5: GOING INTO CONTRACT

Congratulations, you have an accepted offer! Not so fast. You don’t technically or legally ‘have’ anything yet. You still need to put down 10% for escrow and your trusted Real Estate Attorney needs to conduct their due diligence on the transaction. That may include looking at the building financials, the offering plan, and deal specifics. Usually this take about 5 days. Once everything is cleared by your attorney, you are ready to sign the contract and put down your deposit. 

STEP 6: PURCHASE APPLICATION

At this point, you will be handed a condo or co-op purchase application. This serves as your application to live in the building and be approved by it’s board members. As you may have heard, the condominium application approval process is much easier and quicker than the cooperative approval process by which you have to literally be interviewed in person by it’s board members. But don’t worry, your agent will walk you through each step and make sure that your board package is organized and impressive so that there are no issues getting approved. 

STEP 7: CLOSING

While you wait for approval from the condo or co-op, your mortgage broker will be getting your loan cleared by the bank. Once you are approved and cleared, the agents, attorneys, bank and property managing agent will schedule a closing by which you will take possession and title of your new home. You will always be granted a “walk-through” before the closing to check that the apartment is in the same condition as when you first decided to purchase it. The keys will be handed over to you at the closing and you are now the owner of your new dream home!

Market Performance

Here are how some other asset classes performed this week as of this mornings opening bell. The Nasdaq and S&P hit five month highs.

Mortgage Rate Update

Mortgage rates moved up for the second consecutive week. The economy is showing signs of resilience, mainly due to consumer spending, and rates are increasing. Overall housing costs are also increasing and therefor impacting inflation, which continues to persist.

News You Can Use

• Markets Have Whiplash As Inflation Cools, But Jobs Remain Strong Axios

• What is a Rolling Recession and is the US Economy in One? Fox Business

• The US Consumer Bounces Back WSJ

• Home Builder Sentiment Jumps Highest Number Since September CNBC

• US Bank CEO's Say Economic Pessimism is Lifting Reuters

• Retail Sales Jump 3% in January, Smashing Expectations CNBC

• Inflation May Not Recede In a Straight Line Axios

• Worker Burnout is Even Worse Than at the Peak of the Pandemic Bloomberg

• Biden Pledges Not to Let America Default on its Debt Reuters

• Bill Ackman Predicts Investor Vivek Ramaswamy Will Be our Next President NY Post

The Deep Insight

 Puppy of the Week

Will return next week!

Contact Me

Feel free to reach out to discuss more in-depth about your real estate goals, share your thoughts about my newsletter, or lobby me to have your dog featured as the dog of the week in my monthly newsletter. Looking forward to hearing from you!