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The First-Time Homebuyer’s Guide to 2009

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Illustration by Mark Nerys  

Pick a project.
Why buy a fixer-upper when you have so many choices that are far less demanding? Because properties needing renovations are up to 20 percent cheaper than their prettified counterparts, says Halstead’s Barry Silverman. Two years ago, people were paying just 5 to 10 percent less—barely enough to cover rebuilding. One “vintage” three-bedroom on Grand Street is on the market for $615,000. A nearby three-bedroom is asking $880,000. “People now don’t seem to want to do any work,” says broker Michele Kleier. “But if they want a deal, they should buy a wreck.” Bear in mind that contractors have a lot of downtime right now, too, so their rates may be negotiable.

Buy in emerging neighborhoods—but carefully.
They seem like bad bets right now. But here’s the thing: During the run-up of the past ten years, according to appraiser Jonathan Miller, the emerging-neighborhood discount—back then, it was a matter of, say, the Lower East Side over Soho—was about 20 percent per square foot. Right now, the difference between emerging and emerged (West Harlem versus the Upper West Side, for example) is 30 percent, and the higher that differential is, the sooner it will start correcting itself. (For example, let’s exaggerate and say that a house on 120th Street costs a quarter what a house does on 90th Street. A lot of buyers are going to opt to head north, driving up prices there.) Look for the best-located properties in that emerging neighborhood, where demand will go up first: on Striver’s Row in Harlem, for example, or someplace where your target neighborhood abuts a more expensive district.


Illustration by Mark Nerys  

Opt for a brand-new condo in the financial district.
There are a lot of warnings out there about buying new construction right now: The market’s glutted, you’ll take years to recoup, you’ll be trapped underwater. Much of that advice is probably accurate, as a general guideline. But there are signs that the financial district, where a good portion of the housing is new development, is the best positioned of all the city’s condo-heavy neighborhoods.

Data compiled by Streeteasy reveal that new-development median prices in the area are down 29 percent over last year at this time; in nearby Battery Park City, they’re down 38 percent. The number of transactions, meanwhile, is up—131 percent year-over-year. That’s a strong hint that all the price-cutting has found buyers and they’re beginning to come back. Halstead’s Brian Lewis points out that the long-term allure of lower Manhattan, plus all the transit and infrastructure investment coming in over the next decade, makes it hard to imagine this neighborhood doing poorly when the rebound comes. If you make a bid, push for concessions: Free common charges and a willingness to pay transfer taxes and throw in some furniture are all in play these days.


Illustration by Mark Nerys  

Buy a multi-unit townhouse instead of a single-family.
The Corcoran Group’s latest market survey shows these types of properties facing 38 percent drops in median prices in Brooklyn; single-family homes saw a conservative 10 percent drop. On the other hand, Miller Samuel’s ten-year survey of Manhattan townhouses (1999 through 2008) shows multi-units appreciating the most over time. “The spread is wider between converted and nonconverted townhouses in bad markets,” he says. In short, the market in multi-unit houses is more volatile, so if you buy when they’re down, there’s more potential upside.

Offer all-cash.
A no-brainer, but it’s truer than ever. If you’ve got cash, you can offer a lot less of it to eager sellers, especially in buildings with jittery co-op boards. Make an offer lower than you would with financing—5 to 10 percent less, especially on properties that have been on the market for a while. “Any transaction right now,” says Miller, “if you put cash in, you’re removing the primary concern of sellers, which is, Are you going to be able to close?”


Illustration by Mark Nerys  

Find a troubled asset.
Foreclosure auctions are a risky game for newbies, but consider making an early offer to homeowners facing problems. NYForeclosures.com and PropertyShark.com publish lists of homes in pre-foreclosure, or lis pendens; call the owners and see if they’re willing to strike a deal. (This is a game for the stouthearted; expect plenty of hang-ups before you get a yes.) If you make a deal, the seller will be able to walk away without wrecked credit. Just make sure your lawyer’s due diligence is really up to snuff—you don’t want to be surprised by a big lien against the property that goes undiscovered till late.

The motivated seller is the way in.
Right now, practical-minded sellers are pricing their properties around 2005–06 levels. So look up comparable sales in your target area from that time period—easy enough to do through websites like Streeteasy.com or MillerSamuel.com—and if an apartment falls below that price point, and it has no additional liabilities, like water damage or doorstep drug dealers, you may have found an eager seller. (Neighborhoods with deep price cuts include Central Park South, Tribeca, and East Harlem.) One notable example: At 301 East 63rd Street, a one-bedroom’s down to $199,000 from $379,000. “That shows motivation,” says broker Rick Wohlfarth. “If I were a buyer, I wouldn’t waste my time on people who are unrealistic.” People who think they’re going to sell for a 2007 price are going to be thinking that for a long time.

Just make a bid.
A lot of sellers are hearing dead silence out there. Your not-exactly-a-lowball offer could be the one that makes them say, “You know what? We can live with that price.”


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