So Close, and Yet So Far

As happens with big changes in my life, I've been ignoring the ol' blog for a while.  It's been a particularly eventful holiday season and New Year!  I'll add more stories with time (maybe).

Lynn and I have been house-hunting.  Well, I guess you could say we've been causally browsing for over a year, stopping by open houses in our neighborhood on weekends.  Just before Christmas, we really started seriously looking—and finding.

We settled on a very nice apartment on Montague Street in our neighborhood of Brooklyn Heights.  It had two bedrooms, 1.5 baths, and was a duplex spread over two floors.  We loved the light, the feel, and were drooling over the space.  It seemed like a little two-story house, tucked away in a historic Queen Anne-style apartment building in the middle of our fantastic  neighborhood.  What could go wrong?

Lots, apparently.

First it was the price.  The sellers, in defiance of the current economy, the housing market, and their own broker's advice, set the price way too high.  We knew we could not afford it at their price, but we also knew it wasn't actually worth that price.  Or at the very least, this market would not support that price.

So, at the advice of our broker, we offered a significantly lower price.  To the sellers, it must have looked like a low-ball offer.  To us, it was the highest we could afford—and a stretch at that.  Initially, the sellers countered our offer with a number that didn't show any seriousness in negotiating at all.  After all, we knew, they had already turned down offers higher than ours.  We went back and said that our first offer really was our "best and final," and we were willing to walk away if they felt it was too low.  They accepted.

Thus began the rush to get into contract.  We had an inspection, the apartment passed with flying colors.  We had to look into the financial history of the building, which is a co-op, and do the due diligence there.  Here is where things fell apart.

A co-op, as most of you who don't live in NYC may now know, is different from a condominium situation.  In a condo, you own your apartment, it is your property.  In a co-op, you own a share in the "company" that owns the building.  Your share is proportional to the size of your apartment, and you own the permanent lease on your apartment.  With co-op buildings, the co-op board of directors also wields extensive powers over the building and its finances, so it is vital to check into the history of the board's behavior.

This particular co-op board took very good care of the building.  They also tried to take care of their residents by now raising the common charges.  But they did this on debt, acquiring a huge mortgage on the building, taking out a line of credit, and depleting their reserves.

And then there was the elevator.  Two years ago, the elevator was found to be in bad shape.  They could update it to the turn of $250,000 or perform several small maintenance repairs that would make it last another two years.  Well, those two years are over, and it's time to update the elevator.  Because the building has so much debt, and no reserves, that money has to come from the residents.  It was too much money for us.

We went back to the sellers, explained the extra expenses and offer an even lower price to off-set paying for the elevator.  They declined.  We moved on.  We sure learned a lot about the process, though.

And it definitely helped prepare us for the next apartment.  To be continued...