Article
Tough Times in a Hot Real Estate Market
Author(s):
Manhattan real estate has been on a tear. However, despite being in a desirable location, Shirley Mueller, MD, didn't find it easy to sell her Upper East Side co-op.
“They are a lovely couple whom I believe to be very board-passable, are offering $XX and half of the flip tax. ALL CASH and eager to close before the end of the year.”
This was the email from our New York City real estate broker responsible for selling our existing property on the Upper East Side in Manhattan. We had purchased a larger co-op in the same area a few months earlier.
The date: Nov. 7, 2013, only 38 days after our co-op was placed on the market. We had nibbles before, but not a concrete offer. Our broker said the buying couple was thrilled. We were, too.
Our previous place—a so-called 5—had 2 bedrooms, a dining room, living room, and kitchen. It was in an ideal location, one block from the park and 3 blocks from the Metropolitan Museum of Art. In addition, it was next to choice private schools and even a respected public school, very sought after in Manhattan where the municipal schools can be less than desirable.
We had not yet moved from our co-op so the prospect of selling so we could execute our change of address was appealing. We had already made the transfer in our heads and desperately wanted closure.
A photo of our previous co-op that we purchased in 1994.
But, on Dec. 10, 2013, our bubble burst. The buying couple passed the initial scrutiny of the board and went on to the board interview. This, they failed. It is New York after all. Many of our friends said, “We just don’t understand the politics of NYC co-ops.” Neither did we, but we were hesitant to ask. We still lived in this co-op and certainly wanted the board to feel warm and fuzzy toward us.
Our broker plowed on. In fact, I respect the way he shouldered this blow, which had to be a disappointment to him. He had desperately wanted to close the deal before the end of the year, but now there was no deal to close.
Then, on Jan. 14, 2014, less than a month after the board declined our initial buyers, an email came in from our broker with, “Good News” in the subject line. We had another buyer (a couple), this time for the full asking price, plus they would pay part of the flip tax (often paid by the seller). They also had strong financials. Our broker said in his email, “I can’t see any board turning them down.” Neither did I.
But, this especially choice buyer was also not to be. After 3 days, as the papers were about to be drawn up, the couple backed out. A property they had wanted earlier came back on the market. Previously, it had gone into contract with someone else, either because their bid was too low or they were too late. That potential buyer, however, failed the board interview just as had our first buyers.
So, our second potential purchaser gained another chance while we, again, lost our opportunity for selling.
The third time is a charm
Finally, on Feb. 23, 2014—about six months after our co-op had been placed on the market—we received yet another offer, this time in cash, but below the asking price. We were able to negotiate up and had a deal a few days later. It took about 6 weeks for the board package to be prepared. Their financials were approved by the board and they passed their interview April 16, 2014. Now, we were finally set for the closing.
Though we paid the flip tax, we still made a respectable profit, about half of what we would have gleaned in the S&P 500 from 1994 to 2014. At the same time, we had the use of the co-op. We are in Manhattan approximately 10 days a month. Considering a hotel bill for that length of time, our maintenance was easily covered with a considerable sum left over for electricity bills, etc.
Further Reading:
Part I of a 4-part series from 2010 when the Shirley first made a bid on a property in NYC. Advice for Physicians Relocating to New York City
Part II: NYC Real Estate Investing: Brokers, Bids and Breakpoints
