2008 Mar 17th

Hoboken Condo Buyers’ 7 Biggest Mistakes

1. Location Location Location

Location has been, and always will be, one of the most important factors in any real estate deal. From the time Hoboken was settled, the place to be was on the waterfront. That hasn’t changed. If you’re buying a condo in a marginal part of Hoboken, no matter how nice the particular unit, you’re still getting marginal property. In an uncertain economic environment, buying a Hoboken condo in the most desirable part of town, Hudson Street, Bloomfield Street, Garden Street, Hudson Tea or the Shipyard, is your best hedge against a potential downturn. So with all the inventory currently on the market why are you even considering Jackson or Harrison?
The Vanguard at The Shipyard Complex

2. A Few Thousand Dollars Over 30 Years is Not Worth Much

Buyers get all hung up over a few thousand dollars. They will be negotiating with a seller on a half-million dollar condo and walk away from the place of their dreams because they are a few thousand dollars apart. Even for $3,000, we’re talking about less than 1% of the purchase price. Moreover, when you add that $3,000 onto a 30 year mortgage and amortize it, the difference in the monthly payment is negligible.

3. Know What You Can Afford

Hoboken Mortgage Brokers
Many buyers start the house hunt without ever speaking with a financial advisor, bank or mortgage lender. They have no real idea of their budget, how much they will need to put down in cash, or how large a mortgage they can manage. They either look at condos that don’t meet their needs, not realizing that they could afford to spend more or they look at condos beyond their means and then are dissatisfied when they take a step down to those within their budget. Know your numbers before you start looking!

4. Be Committed

If you are really serious about buying a condo in Hoboken you need to do some homework. In addition to knowing your budget (#3), you should have a game plan and follow it. When you go looking at condos, bring a camera and a notebook. Take pictures and take notes. After a few dozen, they will all start to blur together in your head. Look in one area at a time. Start with the nicest part of town you can possibly afford (#1) and exhaust it before moving on to lesser areas. When you see a condo you like, go back to see it again during different times of day – in the morning to check out the light, during rush hour to assess traffic, after school to see where the kids hang out. Make a written list of your priorities and rank them. Compare your list with your spouse’s. Decide what’s negotiable and what’s not in advance. Don’t waste your time looking at units that don’t match your agreed-upon, prioritized needs. If you have a realtor who is taking you to see units that don’t have what you’ve made clear you want in a condo, find another realtor!

5. Beauty Isn’t Everything

Hoboken Condo Detail

As much as everyone wants a gorgeous condo, some units just don’t show well. You have to use a little imagination. You’re not buying the sellers’ furniture. Paint is cheap. I see buyers overlook great properties because they can’t visualize the potential. Often, the seller has failed to do the work needed to market his or her property. A unit that shows poorly may actually benefit a buyer. If the condo has been sitting on the market for a while, the seller may be getting desperate. He may be more willing to accept a low offer.

6. Beauty Isn’t Everything II

When you find a condo you like and are ready to make an offer, insist that the seller provide you with the financials for the condo association. So many buyers are fooled by the pretty appearance of a condo only to be surprised down the road when they learn the association is practically bankrupt and they are looking at a hefty increase in their maintenance. Not all Hoboken condo associations are well run or well funded. Many, especially in smaller buildings, have no reserve funds. So get the whole picture before you move forward.

7. Use a Hoboken Lawyer and Local Bank

Hoboken is a peculiar little city with it’s own way of doing things. Local real estate lawyers are familiar with the peculiarities of doing a real estate deal here. They also all know each other and have likely worked together before. Using your cousin from out of town is not going to save you anything in the long run. The same problem arises with large, national banks. They are used to lending according to certain standards and few Hoboken condo buildings meet those requirements. Yet the local lenders write mortgages for Hoboken condos all the time. Haven Savings or Hudson City Savings Bank are way less likely to have a problem with the condo questionnaire that shows that the building only has 3 units than a Citibank or Chase.

See also: Five Familiar Problems When Buying Hoboken Real Estate

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  1. r

    Cutting $3000 from the price adds up to $24,349.49 in savings over 30 years using a 7% interest rate. Basing a home purchase on the monthly payment is exactly why so many people took a loan out they can’t currently afford.

  2. Lori Turoff

    Did you read the part in #2 about the “30 year” mortgage? Perhaps I should have been clearer. I should have said 30 year fixed rate. There are no adjustable 30 year mortgages (although there are 10 year arms with a 30 year payout). Today’s rate for a primary residence condo with 20% down and good credit is closer to 6%, not 7%. So we are still talking about less than $18 a month. Not a significant amount.

    I agree that many people got into trouble because they were basing their purchase decision on monthly payments – but those monthly payments were a teaser rate ARM. Then the rate bumped up and the trouble started. Buyers (and speculators) overreached assuming they would sell the property at a large profit before the rate bumped up. If all those buyers had gone with a 30 year fixed rate we wouldn’t be in the situation we’re facing today.

    Which brings me back to #3 – know what you can afford. That means for the entire term of the mortgage, not just the first year when the rate is artificially low to get unknowing buyers hooked. Just today, when I asked my mortgage lender contact how much the $3,000 would be over the course of a 30 year loan, he tried to explain that my “buyer” should go with a 10 year arm because “nobody keeps a loan for 30 years”. The tune seems never to change. I am a 30 year fixed girl. Remembering the Jimmy Carter days of double digit interest rates, I jump at the opportunity to lock in under 7 for the long haul. That’s exactly what we’ve done with every property we own. But then, I believe in putting down at least 20% to start and – biggest shock of all – paying off the mortgage entirely when I can. I don’t know how many ways I can say this and I say it to buyers every day – go with a fixed rate when rates are this low. You have no interest rate risk exposure! Hope that is clearer.

  3. Ken Haedrich-AnnapolisHomeDigest.com

    Lori: You make some great points here. First, though, I want to weigh in on the affordability question. With our buyer clients here in Annapolis, we’re encouraging them to take a close look at rate buydowns. If a buyer is in a position to apply a price reduction or seller help to buy down the interest rate on a loan, the monthly mortgage payment can be reduced significantly. Consult with your lender and Realtor to understand how this works.

    As for point #5, you’re so right: beauty is NOT everything. And there are some good ugly bargains out there. The problem is, whereas allowances for items like worn carpet, paint and repairs used to be effective, they’re much less so now. Maybe it’s a little different there, but in the Annapolis market, allowances just don’t cut it anymore. As we tell our seller clients, most everyone today wants the equivalent of a “model home” – and we work like the dickens to make sure our listings do.

    Finally, I really like your blog: good writing, good choice of subject matter. I’ll be checking back often.

  4. Lori Turoff

    I have a listing right now that has “great bones” in a great location but it doesn’t show well at all. The sellers are willing to do some renovations but it just isn’t selling. You are correct – buyers spending half a mil for a 2br want as close to perfect as possible and certainly move-in condition. With the choice of inventory available, they are often likely to get it!
    Thanks for your comments!
    Lori

  5. D

    As a soon-to-be-Hoboken buyer, I mostly agree with your entry. When thinking about location-location-location, however, I suppose I have a slightly different perspective…

    Looking at current listings, I’m not sure I would advise anyone to buy into Maxwell Place at more than $800 per square foot in today’s dollars. Once the new building opens up and you eventually start to see some resale inventory, I’m not sure those units can sustain a 30% premium per square foot over the older South Constitution units (after adjusting for the lack of deeded parking at the latter) that arguably enjoy a better location on the waterfront. Now layer in some normalization of Wall Street bonuses and you get a slow market for $1.6 million two-bedroom units when it comes time to sell and move to Summit with your wife, newborn and three year-old.

    Similarly, you can’t let location force you to overlook other vitally important things. Take the Observer Lofts. In spite of their great downtown location and the fine finishes (e.g., Viking / Sub Zero appliances), the developers offered mostly tandem parking units. Why pay $800,000+ for a unit and have to knock on your neighbor’s door to let your BMW out of the garage? Even if your family doesn’t have a car, it might be a big concern for potential buyers when it’s time for you to unload the property.

    That said, I think that proximity to the PATH train is the name of the game in Hoboken for the long term. The ferry is infrequent and unreliable (and constantly seems to teeter on bankruptcy), as is the bus at rush hour. In the shadow of NYC, I truly believe that it is the ease of access to transportation – not the waterfront (barring, of course, water views) – that will ultimately rein king.

  6. Lori Turoff

    D,
    Have you actually been inside the units at 2 Constitution? Or the Maxwell Place units? There is quite a difference. The basic Constitution unit has popcorn ceilings, checkerboard parquet floors, closed galley kitchens with white cabinets and white appliances, and mostly indirect river views. Maxwell has floor to ceiling windows, higher ceilings, plank floors, cherry cabinets, stainless appliances, huge bathrooms, frameless shower doors, bigger closets, etc. There is quite a difference!

    That same $1.6 million buys you an ordinary, small 2 br in Manhattan. So for people comparing our waterfront to NYC, we’re a bargain even at the high end.

    Have you noticed how many Hoboken families are NOT moving to Summit? I don’t know if you have kids but from what I hear, our schools are constantly improving and our local government changes. And even if what you say is true, if our market softens won’t the market in Summit likely decline as well? So what you potentially “lose” on the sale, you just gain back on the buy side.

    Personally, I don’t find Observer Lofts to be a great location. In my opinion, and it’s just that, they are on a busy, noisy, congested street with few trees or parks in sight and too many bars nearby. Not to mention that the architecture is very ‘particular’. Many buyers I deal with every day eschew downtown because of the noise and other ruckus caused by the unruly bar crowds. Tons of young kids from the ‘burbs coming here to drink (and drive) and not caring at all about our community.

    As for the ferry and the bus – I can’t speak for the ferry but I can see the bus from my windows and for the past decade, it seems to run quite often during rush hours. The ferry may have problems but I can’t imagine that someone wouldn’t want a monopoly transportation route to ferry across the Hudson. Hey – the NYC subways are always on the verge of bankruptcy, too, but it never seems to really matter in the end.

    Personally, I live uptown and I wouldn’t trade my uptown location for proximity to the PATH in a million years but that’s just me, and that’s what makes horse races…For the busy Wall St. type who needs a place to crash to get back to the office asap, maybe downtown is the way to go. Newport and Paulus Hook seem to offer even better transportation and more luxury condos at competitive prices if that’s the deciding factor.

    I stick by my guns – (and I hadn’t discussed uptown vs. down in my post – I touted the river over the west side of town) location is king and for many that means the east side of Hoboken – up or downtown.

  7. Jonathan Bunn - Ashburn VA Real Estate

    This is a great article for buyers. In a market such as this, commitment and long term thinking is very important to the process. this not renting an apartment but a decision that should be seen from all angles with wise council.

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