Four months ago, Shirley Mueller, MD, thought it was time to get out of the market and ended up with a lot of money in her bank account. Here's what she did with that money.
In early June I wrote a column entitled, “Is it Time to Take Money Out of the Market?” I, for one, thought it was. As a result, I ended up with a lot of money in our bank account, all shifted from brokerage firms.
This is what I did with that money.
The kitchen of our new Manhattan co-op as advertised on Streeteasy.com. Notice the heavy duty vent over the stove requested by my husband.
The seller’s broker was skeptical
I have been looking a long time for the right larger co-op in Manhattan. When I found it, I made an offer immediately. It was June and neither my husband nor my broker had seen the property I chose. This bothered the seller’s broker, but not mine. After three years of looking, mostly on my own, my broker was glad to have closure. There was, she anticipated, a check for her at the end of the tunnel.
To tempt my doctor, turned photographer husband, I fulfilled his several requirements, that the stove have a vent and there was wine storage. And I added an extra sweetener: the living room was particularly long and narrow, so if he wanted to take portraits in it, he could. This was also wonderful space for displaying his photographs. So, although he grumbled, mostly worried about spending a large sum, he was not opposed. It is traditional in our family that I take care of the money, including investing and real estate.
The seller wasn’t negotiating, however. As it turns out, my own real estate agent wasn’t either.
“If you want it, you best pay the asking price plus flip and mansion tax and make a cash offer,” she said.
The mansion tax is a state tax payable by the buyer for transactions of property priced $1 million or more. It is 1% of the purchase price. The “flip” tax is the percentage paid to the co-op building where the co-op is sold. In our particular case, it was 2%.
I didn’t like paying the asking price plus both the mansion and flip tax, but felt I had to do so. After all, the real estate market in Manhattan is hot. There simply is no inventory.
This apparent fool-hearty approach appeared to be justified at closing just several months later when my lawyer turned to me and said, “This property has already appreciated.” I knew he was right.
What hurt, though, was that if I had purchased an identical unit in the same building on a higher floor (considered more choice) six months earlier, the purchase price would have been one-sixth less. This was just plain bad luck. Neither I nor my broker had noticed the prior listing for the higher floor so I had to pay the price for the lower floor when it went on the market months later.
A board interview like no other
Of course, we needed board approval since this apartment is a co-op. This board does the most unusual interviews. They come to the prospective buyer’s apartment to meet rather than the reverse. My conclusion is that they want to see how applicants live and transfer that knowledge to their suitability for the building they are buying into.
Dollars diminishing before our eyes
I learned what I already knew when we bought this new co-op: purchasing real estate in NYC is more expensive than you think.
My husband, always funny, said our “dollars got tinier.” This couldn’t be truer.
In addition to paying the seller and broker (usually 5% for properties over $2 million and 6% for those under), there is the mansion tax and often a “flip” tax I mentioned earlier. Of course, there are other assorted minor fees such as a “move-in” fee ($750), the lien search report (inconsequential) and the lawyer charge (at least several thousand dollars).
Will it be worth it?
To me, yes. Our new address, just seven blocks from our old NYC dwelling, is in an old distinguished building with a beautiful large lobby. Entering and leaving this lovely NYC structure each day will in itself make me happy. Additionally, our new co-op exposure is facing south so we will get morning and evening sun. That also makes me happy.
So, like most people, I am just looking for happiness and a better quality of life plus following the advice of Samuel Johnson as applicable to a woman as a man: “A man who both spends and saves money is the happiest man, because he has both enjoyments.”
In addition, I have the satisfaction of taking some money out of the market at its recent near top. If the stock market tumbles, I will have preserved our earlier market gain in real estate that I can enjoy.
Part I of a four part series from 2010 when the author first made a bid on a property in NYC.
Part II looks at the good, the bad (and the ugly) of dealing with real-estate brokers, and the ins and outs of the bidding process.
In Part III a deal to purchase a co-op is suddenly undone — and the down payment in jeopardy.
In Part IV, It isn’t done until it’s done. The property is not purchased for an unexpected reason.