Buying before selling a Manhattan condo

If your apartment hasn't sold in three months, reducing the price is probably the best thing to do. While there are a lot of things that brokers can do to increase interest in a property (open houses, broker open houses, letters to neighboring buildings, etc) the price is the main draw and also the most difficult thing for sellers to want to do, despite having the most dramatic effect.

Carrying two apartments is never a good idea, and if you like the other apartment maybe it is worth taking a hit (if you are) to ultimately be happier in the new place. Are you going to be as focused on the money you didn't make on the sale of your current apartment in three years? Or will you be glad you have your current one at that time? These are questions that I cannot answer for you.

Just one word of advice... until you have a signed contract on another apartment, you don't have another apartment. So I would get a signed contract first, and then get aggressive on your selling your current apartment. The last thing you would want is to get outbid or lose it for another reason and then have buyers kicking you out of your current place into a rental.

(Matthew Russell - Brown Harris Stevens)

OMFG. Heavens forbid, sell your unit first... then go rental and 100% guaranteed to get a nicer bigger unit for cheaper in the next 5 years... WTF r you smoking damier212... if you go rental.... good luck getting laid, good luck getting a job, good luck passing airline security, good luck being served at Nobu,..... I'll fking brand you with the letter R like the rest of the sorry renters on SE....

Mr. Russell.... slippery slope would lead you to buy multiple units... "you don't want to be outbid, do ya punk?" The only sensible action is to bid on every and any units at ALL cost! Cause, beyyyyyytheeeeesssssss I get paid by the transaction!

(w67 - Brown Hairy Floater)

Thank you MRussell for your clear, coherent thoughts and ideas.......as for W. 67th Street, I don't have a clue what you are saying or trying to convey......if your intention was to help me, you have only confused me as I don't understand your answers or comments nor do I think will any of the readers. Yikes!!!!

I am asking for clear advice, not confusion...........

Allow me to translate for Mr W67 -- an astute albeit colorful poster here. Many real estate personnel press people into untenable financial situations simply so they can make commissions. Thus, M. Russell asking, perhaps facetiously, if you will be happy -read:will you be able to actually live with yourself-- if you forego an incredible new apt just because you are so small minded to be concerned about not losing money on your current apt. Implying, "What, you can't take the hit? What kind of man are you". So in essence, M. Russell advice is to sell you current apt immediately at as steep a loss as you can stomach so that you will not lose the better apt that will assure your happiness. Thus W67 laying on the irony that you will be a hapless eunuch if you succumb to being a renter.

On behalf of foreclosed individuals everywhere, let me implore you not to take on two homes in a recession. It is a sure road to financial disaster. If you want to make money in RE, you are warned not to fall in love with any one home -- there is always another one of equal merit. If however, you really don't want to lose this particular apt and you feel you can afford to do so, then drop the price of the apt today by the amount of a year of carrying costs of the apt. Hopefully it sells quickly and you can negotiate for the new apt. And you will know that you have lost only one years carrying costs. You loss will be finite. Otherwise, if you carry both apts, there is always the chance that you cannot sell the apt for two years (it happens frequently) or if the market takes another downturn, you could face three years of carrying two apts and not being able to sell either. Let's have a show of hands for every buyer in Miami and Phoenix that suffered this exact scenario.

@ apt23: I can't say I really agree with most of what you said. Making a commission is nice, but I don't do so blindly without considering my customers. That is a surefire way to shoot myself in the foot and never get a referral.

The fact of the matter is that a good deal of apartments are grossly overpriced. You have no idea how many times I have pitched an exclusive, recommended a listing price and then been told by the seller that their apartment is the best thing on the market and that they will only list it with me for (insert overpriced sum here). I'm not saying that every single broker is a saint, but a majority of them work hard for their sellers to find a price that is right 'at the market' so that they can accomplish their goal of selling their apartment quickly and efficently. There are apartments that have been on the market for well over a year and they are still priced like it was June 2008, but wonder why they haven't sold. I have no information about damier212's apartment, but if he purchased when the market was hot and is now trying to sell at a profit when the market is 20-35% down from where it was 2 years ago then it shouldn't be too unreasonable to say that he might sell at a loss.

I clearly say that carrying two apartments is not a good idea... BUT... This is very much like asking yourself if you should take a loss (or not make much profit) on one stock in order to use that cash to buy another stock. You WILL be able to sell your current apartment at the right price, there is no question about that. But if your future apartment appreciates nicely over the next few years will you still care (like I said before)?

And damier212, w67thstreet is just an Internet Troll (http://www.flayme.com/troll/) who writes posts that frequently make no sense. Like flies at a picnic, just ignore him.

Do not buy, sign or anything else until you have a solid contract signed(Unless you have a secret money fault overflowing with that green fiat stuff.) Not even an offer after 3 months? You need to figure that out first.

I just went through this with a client, a guy who is really not fond of brokers. Over the months we formed a "nice" relationship. He's paid me two compliments; one being "thank you for that good advice to sell my place first, then get serious about buying a new place". And now we have a happy ending; contract signed on his current place and contract to be signed any day on his new home.

Worst case scenario you can put stuff in storage and rent a short term space while you sort out finding your new home. What's the rush? This may be inconvenient but it's better than the stress of what you are setting yourself up for. Patience will serve you well.

Keith Burkhardt
http://theburkhardtgroup.com/agents_details.php?agent_ID=7619

I clearly say that carrying two apartments is not a good idea... BUT... This is very much like asking yourself if you should take a loss (or not make much profit) on one stock in order to use that cash to buy another stock.

It is NOTHING like trading stock, on a stock exchange, where an order is executed in less than a minute at market price. A home may be closer to a bond traded "by appointment" (illiquid) "over-the-counter market" where the price realized could be a bargain or a disaster, depending on the quality of the execution. The seller is more likely to see a better price if they hire a good broker, follow his staging advice and are financially secure to holdout for the best offer. The broker typically prefers a motivated or financially distressed seller, since his commission is relatively unaffected and he will earn it sooner.

Further, a home is not "an investment" likely to appreciate anytime soon; it is merely a place to live. That kind of misguided reasoning encouraged some to buy second or multiple homes, often when they couldn't afford them--just ask Nicolas Cage or Casey Serin.

Finally, how can you pretend to answer OP question without being at least familiar with his current home and its list price?

damien, i did just that in 2005/6. purchased a new apartment while holding my old one. i had a few things going for me:

1) the new apartment needed renovation, so i needed extra time between the purchase and sale to renovate.
2) the new apartment was in the same building.

even in those high flying times, it took me an additional 4 months to sell my old place. my wife almost killed me :-) . the good thing was that i had additional time to find the same materials for cheaper prices for my renovation and shop around for contractors who would give me a discount for not having to finish my apartment as quickly as possible.

it all worked out in the end, but i would never do it again. i sold my place in Nov '09 and now looking for a place to buy while sitting comfortably in a rental that costs approx. the same as the coop i owned after tax.

@ PMG: A home is not an investment? It is typically someones largest investment, actually. If it wasn't an investment, why would ANYONE buy?

And yes, you can stage your apartment and do a majority of other things, but you are essentially just dancing around the elephant in the room which is an apartment that is incorrectly priced in this market. Why do you think that when people change brokers, the new brokers come on with a new price? Because if the old brokers couldn't sell it at one price, you will probably be hard pressed to continue trying to sell it at that same price.

And my commission isn't directly affected? It is a percentage! That is the most direct correlation possible!

Why would ANYONE buy?
1. Forced savings, as you pay down the mortgage, you own the home outright; 2. It's cheaper in the long run; 3. Tax savings; 4. Better quality of life.
A homes price does not have to go rise to justify its purchase.
The bubble just made it easy for the real estate professions.
You're the broker, and you don't know the fundamental motivations of owning a home?

three months is not a long time. You know whether or not your apt is fairly priced. Your broker wants a fast sale more than you do, so don't be so quick to lower the price, as long as it is fairly priced, that is.

As for wanting to buy buy buy right now --- be patient.

MRussell, your client drops the price by $100k; his loss is $100k. Your loss, what is it $3k? That is what I mean by "relatively unaffected"

thx apt23.... $500psf!!! Coming Soon... to borkers everywhere...

Mr. Russell.. I am really confused... in the last 10 yrs ppl have said a "home" is a great investment.. now that the mkt has soured (popped) most borkers I know say "it's a home, not to be confused with a stock." Now here you are saying it's the largest and greatest and mostest leveraged investment us mere renters can only hope and masturbate to.

Now can you tell me what the consequences of having a highly leveraged, highly tax targetable asset in a period of extreme credit / deflationary pressures that is just starting to reverberate throughout the world, coupled with huge gov't deficits? And don't even get me started on China's cities of empty new construction.
http://www.nytimes.com/2010/06/18/business/economy/18econ.html?hp

and finally, Mr Russell as per your quote:
"The fact of the matter is that a good deal of apartments are grossly overpriced. You have no idea how many times I have pitched an exclusive, recommended a listing price and then been told by the seller that their apartment is the best thing on the market and that they will only list it with me for (insert overpriced sum here)."

Can you please explain this POS listing that you just posted a youtube video for
http://streeteasy.com/nyc/talk/discussion/21150-nyc-time-lapse-from-170-second-avenue

You know the listing, where columbiacounty points out "Why is this unit priced 40% higher than recent sale two floors below?"
and ab_11218 states "i have to say only one thing OVERPRICED. they want 2007 price in 2010."

In conclusion let me explain what a hypocrite is: A Broker who professes to know that listings are crazily over-priced yet takes an exclusive knowing full well it is crazily over-priced. I really hope you don't think your HD video is worth $700K....

Oh yeah, suck it.

Have you considered renting your current condo? If the rent on your current condo can pay for your expenses on that unit (assuming you bought in 2005 or before), and you do not need the money from the sale, you can rent it out. Do not forget to factor in carrying cost when the place can not be rented.

It sounds like you don't actually have a realistic sense of what the market price for your apartment is at the moment. If your place was within 10% of market, you probably should have had an offer by now. You went to market at a relatively active time in the market. Maybe you would have rejected it, but you still would have had an offer.

If you're worry about carrying two places for some time, then it makes me think that you don't have a tremendous amount of cushion. If you don't have a tremendous amount of cushion, it makes me think you might be relying on a selling price on your current place. Given that you don't know what that selling price will be (as indicated by the no-offers pricing), then deal with that first.

It sounds like you should be willing to buy the new place before you sell the old place IF:

you are willing to carry both apartments for one entire year

AND

you are willing to sell the place you're in for 20% less than it's currently listed OR you have unlimited sublet rights and are willing to sublet it long-term for a price that is a few hundred a month LESS than your carrying costs.

Any other scenarios, it's a really bad idea.

ali r.
DG Neary Realty

thank you all for your comments.....I want to provide clarity to those that have asked specific questions about my situation so here goes......

I am in a condo and need to stay in a condo due to my profession that can take me out of town for long periods of time should I need to sublet at will. I am trying to buy another apartment in my same building....I have looked everywhere for a one bedroom condo in my area and everything is even pricier than what I can afford. The price for my apt. is not way overpriced.....similar units that are 50 square feet smaller are currently listed for $ 20,000.00 less than mine. The traffic has been very good with the apartment being shown 3-5 times per week and decent open houses. It is renovated and an excellent apartment. Nothing seems to be selling too quickly in my building at the moment. I may bring it down $ 20G to be competitive. If I go much lower than I won't be able to afford to buy the other apartment I have my eyes on after the net amount I will receive. The biggest problem is that I don't want to leave my building where I have lived for 15 years. I am in a large studio. Going to a one bedroom in my bldg can vary from 800 sq feet to about 1200 and only the smaller one bedrooms are what I can afford. In answer to another question, I cannot afford to keep both for one year. $5500 per month x 12 months to carry both will not be possible. I have the 20% down payment and closing costs but need the income from my current place to go towards the new one or my mortgage will be quite high and unaffordable. I cannot sublet either apartment (believe me I tried, as this has to do with my mortgage arrangments thru my credit union).
To the person who said that "if my place was within 10% of market I would have had an offer by now", that is false. It is 10% within market based on all comps in the last six months.

So folks, this is really about $$$ and nothing else. I wish I had the resources to carry both but I don't for an extended period of time.

It sounds like I should lower my price and try to get a contract on the place that I want (which may or may not happen)., or give up for now and wait to see what happens in the market in the next 6 months to one year.

The general consesus here is telling me not to buy before I sell (no matter what I have my heart on), unless I have the resources to take a hit if my place does not sell for whatever reason.

And for the record, I am in what is considered a luxury building, doorman, etc., so it is a desirable building and my apt. is in great condition.....it's just moving very slowly right now for all units in the building and the prices have come down in the last 6 months.

thank you....

P.S.- I am with a leading broker in the city and my broker is also surprised that I haven't even received a single offer in the 3 months........

The issue is not what comps are listed at but what comps are selling at.

If sales are slow in the building, what's the rush on getting the new one?

$20,000 is a rather tight margin of error on a one bedroom condo purchase. How many listings are there in your building? Some buildings have comps that close near listing prices, but there are like 50+ apartments listed, or a multi-year supply. For example, I'm thinking if you owned in RSB, Orion, Atelier etc, you shouldn't count the proceeds on a sale until the closing date. I'm sure that's not the case, but you see my point about supply vs. "comps". A very low floor studio condo in my building sold in two months recently.

Hi PMG,

I am trying to sell a studio to purchase a one bedroom. In my building at the moment there are 4 studios avail, 10 one bedrooms, and 2 2bedrooms all at various sizes. My building has about 500 apartments.

I could use further explanation about your "supply vs. comps"....sorry I am fairly new to all of this so I am not exactly understanding the point you are making.

thanks,

You might want to consider just staying in your studio for a while and saving some money so you have more of a cushion. It is always great to be in a larger space. And, if the market goes up and you are in a one bedroom imagine how happy you would be with you savvy self. - a much larger % of $ increase. But it works the other way too. What if you buy the 1 bed with very tight money. If the market goes down or your circumstances change, you might just end up homeless --like countless others who didn't have an adequate cushion. But if the market goes down and you are still in your studio, you might not be able to sell but you might be able to hang on. If you lose your job, do you have enough to pay the 1 bed for a couple of years? If not, stay where you are and save, save, save.

Damier, So there are four studios available in your building. How many studios in your building have closed in the past year? If it's eight, you have 4 / 8 = .5 year or a six month supply. However, if only four have sold in the past year, then there is a full year supply, plus however many more studios get listed during the next year. Of course this is only a rough approximation based on recent history. Relying on your expected proceeds before a sale, when there is a long supply is not a sound decision. One never knows when the general market will experience a price adjustment, and if that adjustment is negative, you lose. Checking "supply" vs. "comps (or market price)" and "selling volume or (absorption rate)" are a few of the basic concepts to consider when gauging the estimated time to market your home.

With regard to a home as an "investment". Buying a principal residence has two aspects, it is your largest consumption item in your household budget (if you didn't buy a home, you would rent), and it is likely your largest investment, also often leveraged. Owning your principal residence is ALWAYS a safer "investment" than owning rental property because of the consumption aspect of principal residences, as well as the elimination of the risk that a tenant leaves, destroys the place or refuses to pay. However, in an era of declining housing values that we seem to be in today, the leveraged aspect of a homes suggests that you rent, or hedge your bets by being in the smallest home you can tolerate, rather than the largest home you can afford.

Hi apt 23 & PMG,
Apt. 23- Your advice sounds very wise even though it's not what I want to hear! lol.....
The two items I didn't mention were that my apartment I am living in is mortgage free, I paid it off this year. The only way I can buy before selling is by putting a lien on my current place (this is what my credit union will do for me due to the fact that bridge loans no longer exist). Otherwise I would not qualify for a mortgage on the new place based on my current income and assets. I will have enough money once I sell my current apartment but not without this quasi "bridge loan/lien" until I sell. I may need to just do what you suggest and put away as much capital as possible so that this whole transition will be easier and not "squeezing" me to the point of being uncomfortable. I will have enough money to pay for the 1 bedroom if I lose my job for a couple of years but it sure will be a close call. Right now I am in a very comfortable position with my mortgage paid off and like you say I can save, save, save.

PMG- I have to run but I will get back to you about the closings in my building in the past year later tonight....

thank you all so much for your help, this may just not be the time for me to trade up based on all that I have read.

daimer212 - I was in a similar situation to yours back in 2001/2002 - I had falled in love with a large on bedroom apt with an unobstructed river view and a terrace, but I still had my smaller one bedroom to sell. The price on the new apartment was tantalizingly low, because it was an estate, which was fine because I wanted to customize. After much deliberation, I chose to let the new place go, and boy, was I glad I did. About 6 weeks later, Sept 11th happened, and things ground to a halt. It took more than a year to sell my old place, at a much lower price. I guess my point is, there are forces outside of your control that can add even more uncertainty and risk to the equation. Don't take the risk.

sorry about the typos in my post above, all. this topic had me typing quite furiously, because I remember how hard the decision was.

thanks Lanzz....I understand where you are coming from. Yes, the unknown bigger forces can be disastrous and no one can predict what will happen. Thank you for sharing your story with me as you have been where I am right now and making these decisions are HUGE, probably one of the biggest decisions I will make during my lifetime.....

Based on the new information you gave, i hope you realize that you should not be upgrading.
Whenever anyone says "I need this to make this trade", that's never a good thing.

If you cannot afford to buy the new apartment with a $20k loss on your first property, I might argue that you can't afford it now. 20k ~ only 4 months living expenses if you can't sell.

Hi Spaceboy-
I can afford to reduce $20k on my first apt....originally it was $ 640, then I brought it to $ 619, and I may make it go to $ 600K, all within 3 months.....I won't be able to afford $ 5500.00 carrying costs for both places for an idefinite period in the event I buy before I sell, for a few months, yes...for a year, no way.... hope that clarifies.

If you can't sell your place by end of summer/beginning of school year, it's going into a black hole for winter and activity likely won't pick up again until bonus season next year. In this market and my impression of your situation, I would at MINIMUM wait until i had a few REAL offers on the table before signing any contract to buy.

The bigger issue is that I am struggling to see how you can't afford to carry both for too long but yet you can afford apt #2 without the $1-2k a month you'd save by selling apt #1. Is it because of the lien and most of your equity/net worth being tied up in apt#1?

Let's assume you have high carry costs for studio (No mortgage, $1k maintenance, $1k taxes per month):
2k per month * 12 months = $24k

My impression is that you're already running a fine line of being able to afford apt #2 in the first place if you don't have $25k for a rainy day.

OMG. Do you know what financial security derived from a no mortgage apt can mean? It means confidence-- and therefore success in life. When you are engaged in your life without a huge financial burden keeping you awake at night, every aspect of life is better. I assume you are still in the bloom of youth. When we were young, we lived way beneath our means because my husband was in a corporate job and I wanted him to be able to walk out the door on any given day so his innate talent would not be destroyed by politics and mean spirited boss/hacks. I think it gave him enormous confidence to tell a##holes to back off and he attributes a large part of his success to that fact. And I once walked out of a good job after my boss did something unconscionable. Just walked out. Best thing I ever did. And I am grateful that I had the means to do so.

I know it is confining living in a studio -- I remember it well. But here is what you can do. Take part of your savings (and remember, save, save, save) and take small inexpensive, frequent trips -- hiking in the berkshires at a B&B, a reduced rate package to Miami Beach and the apt won't seem so claustrophobic. Take part of your savings for innovative design - a high end murphy bed,etc--to make more space. Go meditate with some buddhist monks to know that living an austere, high design, minimalist life can be a great thing and perhaps we all have been indoctrinated by a corporate regime to be nothing but consumers with infinite appetites for more crap in our lives.

Damier, since REBNY rules prohibit agents from commenting on other agents' specific listings, I'm going to speak more generally, wearing my hat as a personal finance writer.

You have something a little larger than a pricing problem -- you have a marketing problem. The fact that you are getting decent traffic at open houses and during the week means that your price is within striking distance of reality. However, the fact that you are not getting any offers at all indicates a couple of things:

1) your apartment has a flaw that you're not aware of. Buyers are attracted enough by the price and the pictures to walk in, but then they spot the flaw and walk out. Examples could be poor light, a renovation that's not to everyone's taste, noise issues, building financial issues, etc. The best way to figure out what this flaw is (since you and presumably your agent are blind to it) is for your agent to very carefully follow up with visitors and to get their comments. You can then respond with whatever is appropriate -- a restaging, a re-renovation, soundproofing, lowering the price to compensate, whatever.

2) You live in a big building with a lot of studios for sale and the apartments are seen as pretty much interchangeable. I know you think the 50 more square feet you have makes a difference, but in potential buyers' eyes, it may not. In this case, buyers will gravitate towards the cheapest of the building's studios, and buy that one first. To sell, your apartment will have to be withing striking distance, not just of old comps, but of being the cheapest studio in the building. Since the cheapest listing is currently $20K under you, that suggests that it's unlikely that your apartment is going to clear at a price that will allow you to trade up right now.

Sorry I know it's not what you want to hear, but given your situation, I absolutely wouldn't buy before you sell. I think there's just too much risk on your sales end.

ali r.
My book: http://tinyurl.com/2ag28z

Personally, if you're single and you own your apt free and clear... i mean that's a very enviable situation to be in. Save up and enjoy living without debt.

I mean something you should consider is saving up another nest egg and renting out this property.

I know its not what you want to hear, but I really wouldn't want to go from a great financial situation to an extremely risk one where you could lose both properties and everything should another crisis hit.

My latest comments-
To Spaceboy and all- I made the clear decision today with all of your & others help that I will NOT buy unless I sell first. I am so anxious to get this bigger apartment that I was losing sight of the risk factor involved which is no small item. I was thinking of renting out this place and then renting a one bedroom in my same building but have never been a landlord.....I've heard some great stories and some horror stories about tenants......well, nothing is risk free. It doesn't make me the owner of a bigger apartment, but I still would own my current place mortgage free.

to spaceboy- Yes, it is the lien on my apt. until it sells that is forcing the mortgage up so high and then they will allow me to "re-cast" the loan with the income from my apartment....you hit it on the head....If I was able to sell in a few months with this special "bridge type" loan, no problem. If it took a year, well that's over 50G which would be a huge problem. I have more than 25G for a rainy day, but the last place I want to spend it is to cover the expenses on two apartments, but I have decided not to go that route as of today.......

To Ali- front porch.....I don't think this apartment has any flaws, it is flooded with light and gets unobstructed southern exposure. The renovation I did everyone praises as I worked with an interior designer that maximized the space. The apartment has no noise, is up high enough, and the buildings financials are solid. My agent never heard any negative comments but I suppose she could dig a bit deeper. FYI, none of the studios that have closed in my building recently took under 4 months to sell, many longer. I had my broker lower the price today by $ 20,000.00 so we shall see what happens. Now I am in line with the other studios and some of the smaller ones are asking the same price that I am asking.

to apt 23- Well I'm not that young anymore , at age 49.......however I understand what you are saying about living a minimalist life and about traveling more. I was just hoping in this lifetime to own a one bedroom in Manhattan, lol and have room for all of my belongings. And I certainly know what you are saying about the job situation, if I wanted to walk out the door now, I could and I am paying in real estate taxes and maintenance less than 1/2 of any renters in my building for the same size space. That is very liberating.............

Double long in this market is not bright

damier212, having just read this whole thread I am glad you have made the decision to absolutely sell first. Although it may be a pain, there are way too many unknowns in this market to take the risk of carrying both properties at the same time.

@ w67thstreet: First off, sorry I didn't reply sooner, I didn't have this thread saved. But in response to what you said about my listing, you are right, it is overpriced. I provided a number that was more in tune with the market and the recent sale in the building that you are talking about, and the seller said we should put it on at this number and see what happens. That's the story and an exact example of what you quoted me for above.

The seller bought at the height of the market (you looked at the listing so you can look at what it sold for) and, should they sell, will have to do so at a loss. So what is more important, the new apartment or a loss on this one that probably won't be regained in the next 3 or so years? So far, they are going with the former.

And as for the video; I'm trying to get creative with my advertising on listings with views, regardless of price.