Buying in Manhattan can be completely overwhelming, whether it is your first time or not. It is important to get organized and educated so that the process is as smooth as possible.
1. Put together a “checklist” of exactly what you need and understanding what you can and cannot live without
- There are several factors that need to be considered when purchasing a home. This list usually gets revised as you start looking at properties. Like all things in life, there are usually some compromises to be made. Examples are specific neighborhoods you want to live in, budget, how many bedrooms and bathrooms, amenities, pets, etc. We always suggest spending some time in the neighborhoods that interest you. This can give you a feel for what day to day life would be like living there, and also help eliminate neighborhoods.
2. Understanding the difference between a Condo & Co-op
- This is a very important part of getting educated in NYC real estate. When purchasing a cooperative, you’re purchasing stock in a privately-held corporation. The approval process for co-op buildings can be rigorous and comes with a lot more rules. Examples can include things such as who can purchase and how you can purchase the apartment, specific financial requirements needed in order to qualify by the board, the percentage of financing permitted in the building, etc. However, these will vary from building to building. You also must be interviewed by the board before you are officially approved. In co-ops, you pay monthly maintenance fees. These include basic operating costs, real estate taxes, and the building’s underlying mortgage.
- When you buy a condominium, you are buying real property. Here you pay common charges every month for the operating expenses. Real Estate taxes are paid separately. Condo’s are much better investment properties because they have lenient rules (i.e. subletting) and the requirements and approval process are much easier. However, there aren’t as many condominiums as cooperatives so they tend to be much more expensive. Both types of properties have pros and cons so it is important to evaluate your situation to see what better fits your needs.
3. The Standard Procedure for Submitting an Offer – Once you have identified a property you want to buy, it is important to be prepared to move ahead quickly.
- Identify the Basis Terms of your Offer
- % financing or all-cash
- Is this offer contingent on financing?
- Proposed closing date
- Any other special terms, inclusions or exclusions
- Pre-Approval Letter
- Talk to a Mortgage Broker – If you are financing, this preliminary discussion should happen before you even look at properties. This way you have an idea of what you qualify for. Also, you need to be able to act if you love something, especially in this current market with inventory lows. In order to submit an offer, you will need a pre-qualification letter from your mortgage broker.
- Financial Statement
- Fill out a REBNY Financial Statement when you begin the process. This is a standard form that provides a true and accurate statement of the financial condition of a prospective buyer. This is required in submitting any offer because it provides the seller’s broker and seller a clear picture of the strength of your offer and how qualified you are to pass the board.
- NYC Attorney Information
- Hiring a New York City Real Estate Attorney – I know this not something people usually think about when they first begin their search but it is extremely important. This is something you will need in place when you have an accepted offer on an apartment. This is the only way the process can move forward into a signed contract. It is crucial to have an experienced attorney who completely understands the unique Manhattan landscape. I can’t tell you how many times deals have crumbled because of an inexperienced attorney or one that doesn’t predominately do real estate transactions, especially in New York City. As a rule, time kills deals! So make sure you choose wisely and find someone with a great recommendation.
4. Understand the Buying Process
- Generally a sale in NYC takes around 60 days from the day you sign the contract, to the day you get to the closing table. There are a number of factors that determine how fast or slow this all moves along. After identifying a property you want to purchase, you submit an offer. Once you have an accepted offer by the seller, a deal summary gets sent out by the seller’s broker to the attorneys in order to draw up the contract and to begin their due diligence. Once completed by the attorneys, the buyers sign and then the sellers counter-sign. Once the contract is signed by all parties and delivered back to the attorney, you are officially “in contract”. Then the buyer is required to put together a purchase application. These requirements vary depending upon the building. You have to be comfortable being completely transparent because they will want you to disclose everything you have! The completed purchase application gets submitted to the managing agent. Once they review and approve it, it gets passed along to the board. Once the board reviews and approves it, they have the managing agent reach out to have an interview set up (only in a co-op). Usually, an interview is just a formality. If this is a condominium, the board usually just issues a waiver once the buyer is approved. Once you are officially approved by the board, you can set up a closing date. Usually on the day of closing, you also set up a final walk-through, to tour the apartment once all furnishings and personal items have been removed. This is to make sure that the apartment is in the condition that you have agreed upon in the contract. After a successful closing, you officially get the keys to your new apartment!
5. Doing a Renovation
- If you want to do more than just cosmetic fixes to the apartment, this is a process that must be approved by the board in any co-op or condominium. It is important to note that no work can take place and no paperwork can be submitted to management before the closing. However, you can get as prepared as possible so that you can begin the process immediately after you have closed. You can hire architects and contractors in advance, allow them to tour the apartment and draw up plans and choose appliances and materials in advance. Make sure you request the Alteration Agreement so that you and your hired team can know exactly what the process is in that particular building. The managing agent is the facilitator between you and the board. The approval can vary from building to building but your scope of work and other required paperwork must be submitted and approved before you can start renovating. This is important to take into account for planning and expense purposes, especially if you cannot move into your apartment until work is completed.