Buying Real Estate in New York
Buying an apartment can be a very intimidating process, particularly in the New York real estate market, specially if you've never done it before. Once you have the right mortgage lender, make sure you at least get a pre-approval. Pre-qualifications are only a guess based on what you tell the lender and are no guarantee, whereas a pre-approval will give you a better idea of how big a loan you qualify for. The lender will actually pull your credit and get more information about you. However, you could even take it one step further by getting an actual approval before you start apartment shopping.
Here is what you need to understand about New York real estate
Co-ops and Condominium Apartments
New York real estate is comprised mainly of cooperative and condominium apartments with a smaller selection of private homes, called townhouses or brownstones. Most important is understanding the differences between the two types of apartments you will find in New York City.
Structure of a Co-op Apartment
New York City Co-ops are not a new concept, although they seem to be a type of ownership that is more common in the NYC real estate market than elsewhere in the United States.
- There is more inventory to choose from if the buyer includes co-ops into the mix of properties, and
- Prices are, in general, more attractive for co-ops — simple supply and demand.
An apartment corporation owns cooperatives. Individual tenants do not actually own their apartments as they would in the case of real property. One owns shares in the corporation, which entitles them to a long-term proprietary lease, whereas a condo must be owned outright), real estate taxes, employee salaries, and other expenses for the upkeep of the building.
Considerations When Buying a Co-op Apartment
- The tenant-owners have the right to approve or disapprove of any potential owner.
- Some buildings require substantial down payments. Generally speaking, in New York prospective purchasers should be prepared to put down at least 20 to 25% of the purchase price for for a co-op.
With this in mind, it is important to remember that co-ops are the norm here in New York, not the exception. However, before beginning a search for a New York real estate asset, think about the financing limitations and the application and interview process; as well as the fact that the board will dictate to whom you can sell and rent your apartment.
Structure of a Condominium (condo) Apartment
While condominiums are quite common throughout the country, they are a rather new concept for New York City real estate. A condominium apartment in Manhattan is real property. The buyer gets a deed just as though you were buying a house. Since this is real property, there is a separate tax lot for each apartment. Hence, this means you pay your own real estate taxes for your property. An owner will also pay common charges on a monthly basis. Common charges are similar to maintenance in a cooperative. However, they will not include real estate taxes since these are paid separately, nor will it include the building’s mortgage and interest given that a condominium, by law, cannot have an underlying mortgage.
New York Condominiums are more attractive real estate investments for a variety of reasons:
- Financing the purchase of a condominium apartment is much more flexible than in a cooperative. Generally, a buyer can finance up to 90% of the purchase price.
- While there is an application process, this is not as formal as in a cooperative. The likelihood of rejection is minimal.
- There is greater flexibility in sub-leasing your apartment. This makes condominiums the choice for real estate investments in New York city.
- They are the ideal choice for non-U.S. citizens or for those with their assets held outside of the United States given that co-ops are unlikely to approve a buyer whose funds are not in the U.S.
Steps to finding the perfect real estate asset in New York:
1.-Seek pre-approval for a mortgage
Typical time frame: same day - 2 days. You must know how much you can spend before you spend it. NYC Condominium apartments require at least 10% down; cooperative apartments generally require at least 20% down. However, every building is different. 15% of New York city’s apartment buildings are condominium buildings and the other 85% are cooperatives.
2. Find an apartment
Typical time frame from home search to closing: 60-90 days. Apartment offers are made orally in New York City. When you have found the right real estate investment, a bid or offer will be paced through your real estate agent. They will convey your offer to either the seller’s agent or to the seller directly. The seller may counter your offer. This will begin a negotiation process that will eventually lead to a meeting of the minds. Depending on what you are looking for; the length of your search will vary. The average person sees 20-25 apartments before deciding on one. Internet-savvy buyers save time by doing their homework before their search.
3.Negotiate on the apartment
Typical time frame: 3 days to 2 weeks. Everything is negotiable in New York real estate so inquire about assessments, fixtures, window replacements, air conditioners, rugs, floors, curtains, appliances, working fireplaces, washer dryers, etc. Apartments are delivered swept clean.
4.Sign a contract
Typical time frame: 1-3 weeks. A New York real estate attorney is required to represent each buyer and seller in all sales transactions. Your real estate agent can assist you in finding experienced attorneys. It is important that your attorney specializes in New York real estate (this is a priority). The buyers sign the contract and forward the contract with a 10% deposit; the sellers execute the contract. Possible contingencies: Financing, Board Approval, closing dates. (See our list of closing costs associated with buying and selling condominiums and cooperatives.) 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.
5. Apply for a mortgage
Receive Commitment Letter from Lender. Typical time frame: 6 - 9 weeks. Mortgage applications cannot be processed without an executed contract. If an apartment is being financed, the board requires a commitment letter from a lender. These letters are generally the last items to complete a board package/condo application.
6. Complete a CO-OP Board Package for Condominium application
Typical time frame: 3 - 9 weeks. You will, by now have received from your real estate agent the board requirements and application materials. Cooperative apartment buildings require board approval before a closing can take place. In order to review a potential purchaser, the Board of Directors for a Coop demand extensive information in a Board Package. Condominiums requirements are much less invasive but you still must supply basic salary requirements and or a mortgage approval to prove your eligibility. If there is no financing, it usually takes about 2-4 weeks to gather the information for the board condominium application.
7. Submit CO-OP Board Package or Condo Application For The Managing Agent's Review
Typical time frame: 1-4 weeks. After the buyer’s real estate agent completes the Board package, he/she will forward the package to the managing agent of the building. The managing agent will inspect the package to ensure it is complete. The package will then be forwarded to the Board of Directors of the Co-op. After the Board reviews the package, they will decide if they would like to meet the potential purchaser. In condominiums the owner dictates the process, if the owner approves in most cases the managing agent and board follow suit
8. Meet the CO-OP board for an Interview
Typical time frame: 30 minutes - 1 hour. This is a serious matter and not to be taken lightly. It should be treated as a business meeting. Co-op Boards typically meet once a month and some Boards do not meet in August. Every Board is different, but generally, a Board Meeting will be held in the evening on a weeknight. Although a board interview may be granted, this does not guarantee board approval. Condos do not usually require an interview.
9. Receive board approval from the board
Typical time frame: 1 day - 1 week after board interview. The managing agent will generally alert the seller’s broker whether a potential purchaser has passed the board. Condominiums your broker will inform you if your application has been approved.
10. Schedule apartment closing
Typical time frame: 1-2 weeks after board approval. Managing agents generally set the date for closings, and lawyers for sellers and buyers coordinate with the appropriate banks on available dates and times.
Typical Time Frame from the time an apartment is found to closing: 2-3 months