B U Y E R S
Buyers Guide NYC
NEW YORK CITY IS HOME
TO ONE OF THE WORLD ' S MOST EXCITING REAL ESTATE MARKETS. WITH THE HELP OF THIS GUIDE, YOU'LL LEARN THE NUANCES THAT MAKE NYC'S REAL ESTATE PROCESS SO UNIQUE & GAIN
AN EDGE IN THE MARKET
When you’re ready to take the next step, we're here to help you determine which neighborhood offers the character & amenities you desire, which type of property suits you best and how to negotiate the best deal.
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WHAT'S THE DIFFERENCE BETWEEN A
CO - OP & CONDO?
CO- OP / CONDO
. THE DIFFERENCE PRIMARILY CENTERS ON OWNERSHIP. WHEN YOU PURCHASE A CO-OP, YOU ARE BUYING SHARES OF THE CORPORATION IN THAT BUILDING. WHEN YOU PURCHASE A CONDO, YOU ARE BUYING REAL PROPERTY AND RECEIVE A DEED TO THAT PROPERTY.
CO-OP
Co-ops are owned by an apartment corporation. When you purchase within a co-op building, you are purchasing shares of the corporation that entitle you, as a shareholder, to a 'proprietary lease.' Generally, the larger your apartment, the more shares of the corporation you own.
Co-op shareholders contribute a monthly maintenance fee to cover the building's expenses. The fee covers such items as heat, hot water, insurance, staff salaries and real estate taxes.
A co-op board of directors has the ability to determine how much of the purchase price may be financed and minimum cash requirements.
Subleasing a co-op can be difficult. Each co-op has its own rules and they should be carefully received prior to submitting an application to purchase.
All prospective purchasers must interview with the Board Of Directors. Prior to the interview, prospective purchasers prepare a detailed 'Board Package' which usually contains personal and professional letters of recommendation as well as a great deal of personal information concerning income and assets.
CONDO
As opposed to a co-op, a condo apartment is a 'real' property. A buyer receives a deed just as though they were buying a house. Each individual apartment in a condominium receives its own tax bill. There is a monthly common charge similar to the maintenance charges in a cooperative. Those charges don't include your real estate taxes and are not tax-deductible. Monthly common charges tend to be lower than in co-ops because there is no underlying mortgage for a condo building.
The straightforward nature of buying a condo coupled with the fact that, in some cases, you can finance up to 80' of the purchase price and sublet them indefinitely, make condominiums the number one choice for flexibly and longevity.
CONDOP
A condop is a condominium building that has separate commercial and residential units, with the residential units controlled by a co-op corporation. The separate commercial units are typically sold separately by the developer and can include retail or office space. Closing costs will be similar to that of a co-op and you will be buying into shares of a corporation rather than real property.
75% CO - OP
COOPERATIVE BUILDINGS
Co-op buildings are more common in New York City than in other parts of the country.
Approximately 75 % of available New York City apartments at any given time are co-ops. Individual tenants do not 'own' their apartments as they would in the case of 'real' property.
Rather, co-ops are owned by an apartment corporation and individual unit owners are 'shareholders,' which entitles them to a long-term proprietary lease. Co-ops are traditionally stricter when approving a buyer whose funds are not in the United States.
CONDO
CONDOMINIUM BUILDINGS
On average, 25 % of available New York City apartments are in condominium buildings. When you buy a condo in New York City, you get a deed as if you were buying a housethis categorizes these units as 'real' properties, unlike co-ops. Condos are the preferred choice for those with assets held outside of the United States or for buyers who are interested in greater ownership flexibility.
THE DIFFERENCE BETWEEN A CO- OP & CONDO
COST APPROVAL PROCESS FINANCING MONTHLY FEES TAX BENEFITS
SUBLETTING SELLING
CO-OP
Generally, more attractive.
CONDO
Generally, more expensive.
The board interviews all prospective owners, and has the right to approve or reject any applicant.
Be prepared to put down at least 20 % of the purchase price, plus closing costs.
Maintenance fees based on the number of shares the tenant owns (typically dictated by apartment size and floor level).
Shareholders can deduct their portion of the building's real estate taxes & their proportionate share of the interest on the building's mortgage.
Must be approved by Board of Directors. Board will need to approve the new buyer.
No interviews are required Application is not as rigorous as the co-op board process.
Be prepared to put down at least 10 % of the purchase price, plus closing costs.
Common charges (services and amenities shared by condo residents) and property taxes.
Real estate taxes are deductible, but common charges are not.
Typically permitted.
Can be sold at will.
KEY MOMENTS
IN YOUR JOURNEY
Once you're ready to buy, your agent will communicate your offer to either the seller's agent or to the seller directly. The seller may counter your offer, which opens a negotiation process that will eventually lead to a meeting where price, terms and closing date will be agreed upon.
You'll want to be represented by an attorney that is familiar with NYC real estate during this stage. They should examine the contract of sale and by-laws and financial condition of the building to conclude it's satisfactory before allowing you to sign the contract.
At this time, you will usually be required to present a deposit. The contract, plus the deposit, will then be forwarded to the seller for a signature. This money will be held in the seller's attorney's escrow account until closing.
It is important to note that until all parties have signed the contract and it has been delivered, the seller can still entertain and accept other offers.
If financing, you should move forward with your loan application and schedule an appraisal with your financial institution.
6
5 SIGN CONTRACT
4CONTRACT REVIEW
3 OFFER NEGOTIATION
2 PROPERTY SEARCH
1PRE-APPROVAL
You will receive these requirements and materials from your agent, which typically include: an application, a financial statement signed by the purchaser or a CPA, all requisite support for your financial statement, two to three years of tax returns, bank statements, letters of personal and financial reference, letters of professional reference, the contract of sale and bank documents (if financing) indicating that your loan is in place. Your Douglas Elliman agent will assist you in this process. In the case of a co-op, if your application meets initial approval, you will be invited to be interviewed by the board or an interviewing committee.
Congratulations! From all of us at the Alexander Team.
11 FINAL WALK THROUGH & CLOSING
10 CLOSING SCHEDULED
9 BANK SUPPLIES CLEARANCE TO CLOSE
8 BOARD APPROVAL
7 COMPLETE APPLICATION LOAN APPLICATION
Key Documents to prepare for buying
Every building is different and will require varying documentation Below are frequently required documents to have ready and prepared for application submission.
- PROOF OF ASSETS
- TAX RETURNS & W2S
Two most recent
- BANK STATEMENTS
Two most recent and consecutive
- LETTER OF EMPLOYMENT
WHAT'S THE AVERAGE TIME LINE TO BUY: 3-4 MONTHS
BUYING AN APARTMENT
CAN BE A HIGHLY COMPETITIVE PROCESS, ESPECIALLY IN NYC WHERE BIDDING WARS ARE COMMON. BEING PROPERLY PREPARED TO MAKE AN OFFER & SIGN CONTRACTS IN A TIMELY MANNER ARE KEY FACTORS TO BEATING OUT THE COMPETITION & GETTING YOUR DREAM HOME.
PRE-QUALIFIED MORTGAGE
A 'pre-qualification' on a mortgage will give you an advantage with a seller. A ten minute conversation with a mortgage broker will produce a credit check and verify your income, assets, retirement funds and liabilities - all of the elements necessary to determine your borrowing potential. A pre-qualification letter may be issued that specifies your borrowing power and price range. Once you submit the required paperwork to the mortgage broker (tax returns, bank statements, pay stubs, etc.) the pre-qualification status will move up to a pre-approval status.
NO MORTGAGE CONTINGENCY
When sellers have a choice of buyers, they are likely to choose the one who offers the most straightforward contract. A contract that is not contingent on the buyer obtaining financing is particularly attractive concerning income and assets.
FINANCIAL STATEMENT
When your candidacy is being evaluated, cooperative and condominium boards will scrutinize both your offer and your financial condition. Therefore, during the bidding process you will be asked to submit your financial statement to the seller's broker. You should also be prepared to show supporting documentation for any asset listed on the financial statement.
BIDDING WARS
A bidding war ensues when two or more buyers compete for the same property. This process sometimes drives the price beyond the seller's original asking price before one buyer emerges victorious. Especially aggressive bidding wars may require sellers to request that each prospective buyer submit a 'highest and best' offer, or that buyers present written, sealed bids. Your broker will help you devise strategies for handling these situations when they occur.
PURCHASING GUIDE
A GENERAL TIME LINE OF THE STEPS YOU WILL TAKE TO FIND & CLOSE ON YOUR NEXT HOME
1 Month
SPEAK WITH A MORTGAGE BROKER, BANK OR FINANCIAL ADVISOR
1 - 2 DAYS
It is beneficial to have an idea of how much you can spend on an apartment before beginning your search. Keep in mind that financial requirements vary from building to building.
FINDING AN APARTMENT 1 DAY - 3 MONTHS
Depending on what you are looking for, it could take one day or even one year to find an apartment. If you are serious about an apartment, ask to see the building's financial statement to determine if the building is financially sound. NEGOTIATING ON THE APARTMENT
3 DAYS - 2 WEEKS
Everything is negotiable. Inquire about assessments, fixtures, window replacements, air conditioners, floors, appliances, working fireplaces, washers/dryers, furniture if applicable, etc.
SIGNING A CONTRACT
1 - 2 WEEKS
Generally, in a sales transaction, both the buyer and the seller are represented by a New York City real estate attorney. The seller's attorney draws up the contract for the buyer's attorney and upon receipt, the buyer's attorney performs a 'due diligence' - reading minute details, reviewing financial statements of the buildings, etc. Once all terms are agreed to, the buyer signs the contract and returns it to the seller's attorney along with a 10 % deposit. Once the deposit is received, the seller executes the contract. Possible contingencies may include financing, board approval and closing date. A contract is binding only after both parties have signed it.
APPLYING
FOR
A MORTGAGE
& RECEIVING A COMMITMENT LETTER FROM THE LENDER
3 - 6 WEEKS
Mortgage applications cannot be processed without a fully executed contract. If an apartment is being financed, the Board requires a commitment letter from the lender.
3 Months
COMPLETING YOUR BOARD PACKAGE OR CONDO APPLICATION
2 - 3 WEEKS
Cooperative apartment buildings require Board approval before a closing date can take place. In order to review a potential purchaser, the co-op's Board of Directors review extensive information from the buyer in a board package.
MEET WITH THE COOP BOARD FOR AN INTERVIEW 30 MIN - 1 HOUR
Co-op Boards typically meet once a month and some Boards do not meet in August. Although a Board interview may be granted, this does not guarantee Board approval.
RECEIVE APPROVAL FROM THE BOARD
1 DAY - 1 WEEK
After Board interview. The managing agent will generally alert the seller's broker whether a potential purchaser has been approved by the board.
SCHEDULE A CLOSING
The managing agents generally set the closing date and the buyer's and seller's lawyers will coordinate with the appropriate banks for the available dates and times.
CLOSING COSTS
CONDO
CONDOMINIUM APARTMENT
Typical estimated closing costs in New York State
CONDO
Buyer's Attorney
Bank Fees
Application Fee
Processing Fee
Appraisal Fee
Credit Report Fee
Bank Attorney
Tax Escrow
Recording Fees NYC
Fee Title Insurance
Mortgage Title Insurance
Municipal Searches
Flip Tax
CONDO
Residential Condo Unit up to $ 499,999.99
Residential Condo Unit
$ 500,000 and up
Commercial Condo Unit up to $ 499,999.99
Commercial Condo Unit
$ 500,000.00 and up
CONDO
Maintenance Adjustment
Short-term interest
BUYER
Consult your attorney
$ 750 - $ 1,000
$ 350- $ 650
$ 330 - $ 500
$ 500 - $ 2,000
$ 45 - $ 100 +
$ 650 - $ 1,000
2-6 months
$ 250 - $ 750 Approximate
Variable by transaction
Variable by transaction
$ 350 - $ 500
Varies building to building, consult your agent
MORTGAGE TAX
ADDITIONAL EXPENSES
Pro-rates for the month closing
Equal interest for the balance of month in which you close
This closing-cost guide is designed to give you the general costs associated with the purchase or sale of a condominium property. Please note that these are estimates and that potential buyers and sellers should consult their real estate attorney or financial advisor for specifics. Kindly note, we do not represent that these art the entirety of potential costs, but are only to be used as a guide. All transfer and filing fees are subject to change by government agencies in each location.
1Minus $ 30 for 1-2 family
2 Four family residence requires mrt to be calculated at the commercial rate
CO-OP
CO-OPERATIVE APARTMENT
Typical estimated closing costs in New York State BUYER
CO-OP
Buyer's Attorney
Bank Fees
Application Fee
Processing Fee
Appraisal Fee
Credit Report Fee
Bank Attorney
Lien Search
UCC-1 Filing Fee
CO-OP
Miscellaneous
Co-op Charges
Recognition
Agreement Fee
Flip Tax
Maintenance Adjustment
Short-term Interest
Consult your attorney
$ 550 - $ 1,000
$ 350- $ 650
$ 330 - $ 500
$ 500 - $ 2,000
$ 45 - $ 100 +
$ 650 - $ 750
$ 350 - $ 450
$ 20 - $ 40
ADDITIONAL EXPENSES
Varies by building
$ 250 Approximate
Please check with building
Pro-rates for the month closing
Equal interest for the balance of month in which you close
2,000,000 - $ 2,999,999
3,000,000 - $ 4,999,999 $ 5,000,000 - $ 9,999,999
10,000,000 - $ 14,999,999
15,000,000 - $ 19,999,999
20,000,000 - $ 14,999,999
25,000,000 or more
New
TERMS
APPRAISAL
Process of determining a property's market value.
CLOSING COSTS
Expenses over and above the price of the property, paid at the closing.
COMMON CHARGES
Monthly charges paid by condo owners that cover the cost of shared building amenities.
CONTRACT OF SALE
A legal agreement between a buyer and seller that outlines the terms of purchase or transfer for a property.
CO-OP BOARD
A group of residents elected to represent all shareholders within a co-op building. The board determines the rules of the building, addresses building issues and reviews new buyer applications.
FINAL WALK-THROUGH
A property inspection that takes place a few days before closing so that the buyer can ensure the space's condition is true to what is specified in the contract.
IN CONTRACT
An offer has been made and accepted on a property. The buyer has paid a deposit and both seller and buyer have signed the offer. The listing is no longer available on the market unless the deal falls through.
MAINTENANCE FEE
Monthly charges paid by co-op owners to cover operating expenses of the building, including taxes, insurance, etc.
MORTGAGE
Loan that a bank or lender gives you to buy a house. A mortgage payment is made up of principal, interest, taxes and insurance.
PRE-APPROVED
Written statement from your bank or lender confirming that you are approved for a specific loan amount.
PRE-QUALIFIED
An estimate of the loan amount you will likely be pre-approved for.
