Buyer’s Guide New York City
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A Note to the Buyer First and foremost, we are sincerely honored to have the opportunity to discuss the purchase of one of your most significant assets. Because we understand that this is a highly important decision for you, our utmost priority is to give you the honest truth and the most comprehensive explanation of the process and our strategy to ensure your success. Transparency and immediate access to listings in today’s market has made the buying process more competitive than ever. Homes no longer need to be “found,� as they are provided to you immediately, automatically. Rather, buyers now have to refine and focus their priorities to be able to pinpoint their target homes and be able to act on them swiftly and competitively. Strategy that you understand and are confident in is the most critical element to your success. There is no fixed price that a property will sell for, and best guesses are simply that. There are many steps to the process, and multitude of scenarios that can happen, with differing strategies for each. This guide contains all of the secrets, tips, and strategies that we have learned over the years. It goes in depth into the process and why we suggest certain practices so that you are best equipped and set up for the highest probability of success. Execution of that strategy is equally critical, which is why we choose to position our team at Compass. It is without a doubt that by combining our proven Strategy, the Compass platform, and our Personal touch through friendly, professional communication and expert negotiation, we can work together to achieve your ultimate success. No matter the final outcome of your decision, we hope that this guide, along with any further discussions we have with you, provides value to you, and contributes positively to the success of your journey in real estate and beyond. Please take the time to review the contents of this guide, and let us know of any additional points you would like us to address. We look forward to the opportunity to work together. Respectfully, Jeffrey M. Schoman, Esq. and Evan J. Jaquias-Johnson
Owning a home in New York City New York City is one of the most diverse and competitive real estate markets in the world, and we understand that making the decision to buy a home here can be a particularly overwhelming experience. From mastering the difference between condos and co-ops, to planning for closing costs, to approaching the board approval process, there’s a lot to learn. That’s why we’ve created this buyer’s guide— to set you on the right course to owning a New York City home of your own.
Table of Contents
A Note to the Buyer Our Team The SJT Difference Service Area & Transaction Types Testimonials How to Buy a Home Purchase Timeline Comparison: Co-op Vs. Condo Investment Strategy About Compass: Difference & Reach Closing Costs - Purchaser Closing Costs - Seller Professional Team Understanding Pricing & Determining Value Offer Strategy Differences Anatomy of an Offer Frequently Asked Questions
The Schoman Johnson Team Licensed Associate RE Brokers Certified Negotiation ExpertsTM sjt@compass.com
Jeffrey M. Schoman, Esq. & Evan J. Jaquias-Johnson are highly accomplished real estate professionals with distinguished track records of success over their 20 years+ as NYC brokers. Both associate brokers, as well as Certified Negotiation Experts™, Jeff and Evan have helped hundreds of individuals and families with the purchase, sale, or lease of their home in Manhattan, Brooklyn, and LIC. They are well versed in transactions of all types including condo and co-op resales, new development, estate sales, pieds-à -terre, leasing, and landlord representation. The secret to their success is a knack for forming close, authentic relationships with their clients and a history of delivering top-level results. They pride themselves on an unparalleled knowledge of both residential sales and rental markets as well as individualized customer service. When working with the SJT, one of the most important distinctions is in the way the team operates. Jeff and Evan personally handle every aspect of the process, from the initial client meeting, all the way through the closing. This hands-on, personal approach helps ensure that no detail gets overlooked and each client receives the attention and dedicated service that they deserve. New York City is the most competitive market in the world, so you need an experienced team behind you to help maximize your goals and attain your personal dreams. The SJT has you covered. Whether you need a lender, experienced real estate attorney, architect, reliable contractor, or a sounding board, we know everyone and everything you would ever need to successfully navigate the NYC real estate market.
The Schoman Johnson Team Jeffrey M. Schoman, Esq. Associate Real Estate Broker jeffrey.schoman@compass.com 781.964.1724
Jeff prides himself on delivering top level service and the long standing relationships he has with his loyal clients. His background in law has made him a highly skilled negotiator and equipped him with the tools necessary to give his clients an edge in any transaction. Prior to moving to New York and entering real estate, Jeffrey grew up outside of Boston. He completed his Bachelor’s Degree in Business at University of Massachusetts at Amherst, and subsequently his J.D. from Suffolk University Law School. Although not currently practicing, he is an actively licensed attorney, Certified Negotiation Expert™, and a member of REBNY as well as the New York City Bar Association.
Evan J. Jaquias-Johnson Associate Real Estate Broker ejj@compass.com 347.280.3826
Developing an expansive depth and breadth of knowledge from years of experience, Evan has worked in a range of capacities including commercial leasing, residential property management, on-site leasing, rentals, and sales. His straightforward, data-driven approach ensures his clients’ real estate decisions make financial sense – critical for the buyer, seller, or investor. A Southern California native, Evan has lived in Bushwick and Park Slope in Brooklyn, and Midtown and the Upper East Side in Manhattan where he currently resides. Evan graduated Magna Cum Laude from the State University of New York at Stony Brook and holds a B.S. in Business Management with a concentration in Finance, and a Minor in International Studies
The SJT Difference When deciding on a team to partner with to represent you as your buyer’s agent, it is critical to understand what services and value they bring to the table.
Additional Complimentary Services you receive when working with the SJT
Interior design consultation with Heather York of Home Story Design Moving paid for up to $2500 Moving day care package Housewarming Party catering paid for by the SJT
In addition to services directly associated with the buying process, we provide and assist with the following:
Intros to professional team: mortgage bankers, attorneys, inspectors...etc Onboarding onto Compass apps and tech Collaborating with you to determine criteria that could work best for you Conduct guided, in-person neighborhood tours as needed (if unfamiliar with the area) Setting up automated listings search and Collections Open House detailed tour sheets Schedule individual viewings for selected listings Accompaniment on 2nd viewings Pre-offer due diligence Compilation of offer and offer materials Advise on offer strategy Certified Negotiation ExpertTM negotiation techniques used on your behalf
Facilitate attorney due diligence Facilitate appraisal and mortgage process Facilitate and review of Purchase Application prior to submission Compilation of Purchase Application and submission to managing agent Facilitate managing agent review of Purchase Application Prepare buyer for board interview Facilitate closing schedule as needed Prepare buyer for final walk through Facilitate final walk through Facilitate any final items that come up during closing Quarterback the entire process, being available to answer any questions and make sure the rest of the process and team is on track
After the closing
Moving Resources and Ancillary Concierge Services Resource for any real estate related needs or questions that come up in the future Provide vendor referrals for any goods or services you may need in the future Assist all of your referrals with their sale, purchase, rental, relocation, or commercial needs
Services Area and Transaction Types Offering full-service, end-to-end solutions for all 4 transaction sides: We service all real estate brokerage needs in NYC, as well as in every major metro market across the United States via our in-house partner teams.
Seller / Developer Representation
Resale: full-service including consultation, preparation, staging, marketing, and sale Estate Sales: full-service including junk removal facilitation
New Development: comprehensive marketing suite customized to the particular details of the project • Small Scale Project (i.e. non-doorman, no on-site sales gallery) • Large Scale Project (i.e. on-site sales gallery)
Buyer Representation
Primary Residences and Pieds-à-terre: full-service including consultation, 360-degree advisement, negotiation, moving facilitation, postclosing design consultation and resources.
Investment: full-service acquisitions, asset analysis, on-market & off-market, post- closing Landlord Representation as outlined above • Individual condo unit purchases • Townhouse re-development and conversion • Multi-unit commercial property
Tenant Representation
Long-term and Short-term* Residential: full-service including relocation advisement, local and remote property tours, design and furnishings consultation and facilitation, moving facilitation Commercial Leasing
Testimonials
“We recently closed on an apartment for our client. We used the Schoman-Johnson Team for this transaction. The process was challenging due to our issues with having to secure authority to sell the property in our client’s estate. They were very patient and helpful and successfully yielded the estate a higher than asking price.” Mark H. / Estate Attorney / Estate Sale
“The Schoman-Johnson team (Jeff Schoman and Evan “Jeff and Evan make a great team and are the best Jaquias-Johnson) is truly as good as it gets. In a city real estate agents we've ever worked with! They where brokers have a lessthan-nice reputation, this helped us buy a beautiful one bedroom apartment team rises above all others! Jeff Schoman is the best for a great price 4 years ago. We decided to use deal-maker I've ever seen and Evan Jaquias-Johnthem again for our next move to sell that one son is incredibly detail and client-oriented. Together, bedroom apartment and buy a two bedroom they offer their clients the full package. I worked with apartment in a new area of the city! They were them to purchase a co-op apartment this year and extremely knowledgable and guided us through they really took the pain out of the entire process (if the whole process successfully on all fronts. We are you can believe it!). They were there every step of the thrilled with the sale of our one bedroom and even way to ensure I felt comfortable and would make the more excited about our new two bedroom home! right decision. I am now moved into that apartment Thanks again for your hard work and dedication... and couldn't feel happier. Do yourself a favor and use you two are a true find in the NYC area.” them for any real estate needs you may have!” Rebecca L. / Buyer
Blake & Naor S. / Buyer + Seller
Testimonials
“Evan and Jeff were highly effective and helpful in directing us through the difficult and sometimes complicated process of finding an apartment, satisfying the co-op board’s requirements and sealing the deal on our Upper East Side co-op. Many thanks to their team!” Francoise and Mark P. / Buyer
“Evan and Jeff facilitated the sale of an apartment in NYC that was part of an estate I was managing from across the country. They made the process so much less stressful than I imagined it could be. I felt confident in their knowledge of the market, their competency, and their transparency through all stages of the process. They are professional and kind but also have a good sense of humor which was helpful through a stressful time. They were also very responsive and contactedme well outside business hours when he had updates for me. Excellent experience! Thanks again, Evan and Jeff!” Nora P. / Executor / Estate Sale
“I had a great experience working with Jeff and Evan. My situation was a little unique in that I only had ~5 days to look at apartments before making a decision to purchase. They started working with me before I even arrived in New York to look at apartments. They were extremely knowledgable about the market and very organized and tactical about visiting different options in the short amount of time I had to make a decision. Overall, my experience with Jeff and Evan was first class - they are extremely professional and were willing to go the extra mile to make sure I found the right apartment.” Chachu W. / Buyer
How to Buy a Home New York City
1
3
5
Look for a licensed real estate agent who is knowledgeable about the neighborhoods you’re considering and can help guide your search.
Attend viewings and open houses spanning a range of areas and property types. Now is the time to consider your ideal home’s location and amenities.
2
4
Analyze the contract of sale, building financials, and board minutes with your attorney. It’s best to work with an attorney who specializes in New York City co-op and condo sales. Your attorney’s job is vital to protecting your interests, and they have an incredible amount of paperwork to review on your behalf. Therefore, you want to select an attorney who is familiar with these transactions.
Before beginning your search, your first step is to get pre-approved for a mortgage loan (unless you will be paying in cash for the full price of your home). Your Compass agent can connect you to a mortgage broker. Based on your income and credit history, the mortgage broker will determine how much the bank will lend you, which will help you determine the price range for your search.
Reach an agreement with the seller on price and terms. Once you have seen a home you like, you can put in an “offer,” which is a non-binding agreement to pay a certain price for the home. If your offer is lower than the list price, the seller will likely return with a “counter offer” price, which you can choose to accept, reject, or make another offer. Your Compass agent will provide advice on pricing throughout.
Find an Agent
Get Pre-Qualified
Visit Properties
Review
Negotiate
6
Sign Contract and Put Down Deposit
7
Complete Loan Application Organize an appraisal with your bank.
8
Prepare Your Board Package
11
Closing Scheduled by Attorneys
(If you are purchasing a townhouse, skip ahead to Step 10.)
Board Approves the Purchase
10
Bank Issues Clearance to Close
APPRAISAL Assessment of the property’s market value, typically done for the purpose of obtaining a mortgage. COMMON CHARGE Monthly maintenance fee paid by condo owners. Property taxes are not included in the common charge. CONTRACT DEPOSIT A percentage of the agreed-upon purchase price paid by the buyer at the time of signing the contract.
Co-ops are run by a board of directors, who will require a board package in order for you to purchase an apartment. A board package generally consists of financial documents including tax returns, bank statements, mortgage commitment from your bank, and letter of reference. After reviewing your package, the board will set an interview date. Your Compass agent will help prepare your board package as well as prepare you for your interview. While condos do not generally require board packages or interviews, you will need to present a purchase application that shows you are financially qualified to purchase the apartment.
9
Key Terms
Owner of a co-op unit, since what they are actually purchasing are shares of stock in the co-op corporation. The percentage of an individual’s monthly gross income relative to the amount of debt owed. ESCROW DEPOSIT Deposit of funds to be transferred upon completion of the deal. FINANCIAL STATEMENT A formal record of all your financial assets, debts, and liabilities.
12
Final Walk-Through with Your Agent
13
Closing Congratulations, you are now a home owner!
FLIP TAX A tax levied by a co-op and paid by the seller when a sale is made. They are designed to generate funds for the co-op’s cash reserve. MAINTENANCE FEE Fees paid by co-op shareholders that contribute to building operations. LIEN SEARCH A background check on the property and the seller to ensure there are no outstanding debts or claims upon the property. The amount of cash the buyer must have on hand after deducting the down-payment and closing costs. Advanced approval from a bank or other lending institution for a home mortgage. Potential buyers provide an overall financial picture and mortgage brokers provide an estimate of what level of loan you will likely be pre-approved for. RECORDING FEE A fee paid to the local government to officially report a sale of a home; usually paid by the buyer. TAX ABATEMENT Newly constructed buildings sometimes receive abatements so that owners do not have to pay taxes on their units for a specified amount of time. SPONSOR The entity responsible for developing a new building or converting an existing rental building to a condo or co-op.
Purchase Timeline: Co-op Typical Time from Contract to Close: 90 days PREPARATION Agent Consultation Mortgage Pre-approval Select Real Estate Attorney View Properties Identify Property, Submit Offer, Negotiate
ACCEPTED OFFER STATUS Accepted Offer
“Accepted Offer” is a handshake agreement
3-5 DAYS
Attorney Due Diligence Inspection (if applicable)
Nothing is legally binding until contract is signed by both
Buyer Signs Contract
buyer and seller, and the 10% deposit is submitted
Buyer Submits Deposit Check for 10% of Purchase Price Seller Signs Contract
Due diligence and contract signing typically only takes about 1 week, but can take longer depending on the management company, scheduling the inspector... etc.
DAY 1
IN CONTRACT STATUS Fully Executed Contract Sent to Buyer’s Attorney
Contract is now legally binding; countdown to closing date begins
Schedule Appraisal Buyer Begins Mortgage Application Buyer Starts Purchase Application / Co-op Board Package Bank Issues Commitment Letter
Mortgage contingency removed
DAY 30
Receive AZTEC Recognition Agreement from Lender Submit Purchase Application to Board
Board Review of Purchase Application
Each board is different, but most have a 30 day review
DAY 60
period, during which they can ask for additional documents, Board Requests Interview with Buyer
explanation...etc regarding your application. The total review
Interview
including the interview and approval typically takes 4-6 weeks.
Board Approval
CLOSING Lender Clear to Close Attorneys Schedule Closing* Issue Closing
DAY 89-90
Disclosure to Buyer TRID Review Period (3 days)
Final Walk Through
Closing
*New Development: Once contract is fully executed, the process is on hold until the project is ready for move in and the sponsor is allowed to schedule a closing
Purchase Timeline: Condominium Typical Time from Contract to Close: 60 days PREPARATION Agent Consultation Mortgage Pre-approval Select Real Estate Attorney View Properties Identify Property, Submit Offer, Negotiate
ACCEPTED OFFER STATUS Accepted Offer
“Accepted Offer” is a handshake agreement
3-5 DAYS
Attorney Due Diligence Inspection (if applicable)
Nothing is legally binding until contract is signed by both
Buyer Signs Contract
buyer and seller, and the 10% deposit is submitted
Buyer Submits Deposit Check for 10% of Purchase Price Seller Signs Contract
Due diligence and contract signing typically only takes about 1 week, but can take longer depending on the management company, scheduling the inspector... etc.
DAY 1
IN CONTRACT STATUS Fully Executed Contract Sent to Buyer’s Attorney*
Contract is now legally binding; countdown to closing date begins
Schedule Appraisal Buyer Begins Mortgage Application Buyer Starts Purchase Application / Condo Board Package Bank Issues Commitment Letter Submit Purchase Application
Mortgage contingency removed
DAY 30
Board Review of Purchase Application
DAY 60
to Board
Board Issues Waiver of Right of First Refusal
Each board is different, but most have a review period of 30 days or less, during which they can ask for additional documents, explanation...etc regarding your application. Condos only hold the right of first refusal, which gives them the option to purchase the property at the contract terms (this right is almost never exercised except for in extraordinary circumstances)
CLOSING Lender Clear to Close Attorneys Schedule Closing* Issue Closing
DAY 59-60
Disclosure to Buyer TRID Review Period (3 days)
Final Walk Through
Closing
*New Development: Once contract is fully executed, the process is on hold until the project is ready for move in and the sponsor is allowed to schedule a closing
Condo
Cost
Typically cheaper.
Typically more expensive.
Supply
75% of NYC’s housing. Built before 1980s.
25% of NYC’s housing. Built after 1980s.
Culture
Most units are owner-occupied. More controlled and stable.
Mix of owners and renters. More laid back.
Approval Process
Very strict and thorough. Personal interview required.
Less rigorous—no interview. Quicker to approve.
Ownership Type
Indirect. Stock certificate and lease.
Direct. Buyer owns real property.
Monthly Payments
Maintenance fees. Amount includes taxes.
Common charges. Taxes paid separately.
Tax Benefits
Some tax deductions can be taken for owner’s share.
Tax abatement programs keep taxes low for about 10 years.
Limited, if allowed at all.
Easy and unrestricted.
Re-Selling
New buyer must be approved. Seller must pay flip tax.
New buyer can rarely be denied.
Investor Friendly
Rarely.
Yes.
Renting Out
Co-op vs. Condo
Co-op
Investment Strategy Fundamentals to consider when buying in NYC
In prime NYC locations, appreciation, stability, and liquidity reign supreme.
Location Characteristics to Look For Proximity to Subway: transit-oriented development will always be pertinent, and proximity to a subway (especially express vs. local) station nearly always expands the potential buyer pool, and thus value, when selling or renting Street-level retail potential: consider how “walkable” and “neighborhoody” the immediate area feels. If the area is still up and coming, look at the existing retail space: is there a lot of it on the surrounding avenues? Are they larger spaces that attract banks, grocery stores...etc, or narrower spaces in smaller buildings that would attract restaurants, bars, coffee shops…etc? Starbucks and CitiBike: these institutions do intensive market and demographic analyses, with the target market for both being indicative of gentrification. Looking for existing locations, or monitoring upcoming locations can provide insight into a specific area that is of value to investors. Follow the townhouses (vs. apartment buildings): paying attention to the side streets, if in a townhouse neighborhood that has not yet gentrified nor been redeveloped, townhouses are many times the first to see changes as they attract wealthy families looking for more space, or investors looking to flip, or convert to rentals. Apartment buildings on side streets are generally slower to see redevelopment or conversion (to condos) seeing that they are typically at or approaching height and/or FAR limits, and can also have more rent-regulated or subsidized tenants which can be difficult to make vacant. Rezoning: monitor zoning changes, typically in older commercial neighborhoods that have significant numbers of defunct industrial or other types of underused properties. Look for areas that have already started to see variances for residential use of existing commercial buildings such as industrial lofts turned into apartments. New developments of purely residential properties, whether rental or condo, is also a good sign that zoning is changing, and supply can continue to increase along with demand.
Investment Strategy Fundamentals to consider when buying in NYC
Historic District Designation: when the Landmarks Preservation Commission, Department of City Planning…etc. designates a historic district, this is a good sign. It indicates two things: 1) intrinsic value in the historical nature of and area, architecture, or collection of properties…etc., and 2) that there is pressure from owners and developers to build and redevelop the area. This is a good sign that the surrounding area will grow and increase in value, thus raising the values of the historic district. Apartment Characteristics to Look For Prioritize views and light: high floor with open skyline, water...etc is most ideal. But, open and unobstructed on a lower floor is also very desirable. It’s the light, and feeling of openness that counts. North facing can be perfectly fine, and in many cases more preferred to South facing depending on exposure. Prioritize layout: the size can be on the smaller end, but the feel of each room or space should feel comfortable. A good “flow” and flexible layout options positively impact a unit’s value, and expand the buyer pool which is critical when renting or selling. On the other hand, while a room that is too small can present an opportunity to renovate, change layout for the better, and create upside, once a room drops below ~10 feet in any dimension, take great care to consider the impact on the utilization of that room and the layout as a whole. If a space is too small and only has limited use, its value drops significantly, even though the total interior square footage may be large. This is also true for odd shaped layouts with protrusions or unusual nooks compared to square walls. Below grade (basement) space, low ceiling heights, and less-than-full-height floors or loft space also tend to have limited use and therefore, value. While they are unique, they cater to only a specific type of buyer which makes the property more difficult to sell or rent. Certain floors are better than others: limit your search to either elevator buildings, or walkups with 3 flights or less, and avoid ground floor units unless they have a private outdoor space. Most buyers and renters shy away from ground floor units due to decreased privacy and security, as well as natural light. Most buyers and renters also tend to avoid walk-ups 4 and 5 flights up - private roof access is an exception. Differentiation and Outdoor Space: private balconies, terraces, or backyards are the other most significant differentiating factor. Too large, and it becomes niche. Usability is key, and differentiation in the marketplace provides a draw to renters or buyers.
Investment Strategy Fundamentals to consider when buying in NYC
Risks to Watch Out For Building Financials and Key Ratios: be wary of the building’s overall economic health. Look out for excessive sponsor owned or investor owned units as they can potentially make the building difficult to obtain financing. This can limit your buyer pool to all cash, or primarily investors. Sometimes this can still be acceptable if the property meets many of the other fundamentals and is in a lower price point where there are plenty of all cash buyers, i.e. under $1M. Higher than average carrying costs (Maintenance or Common Charges+Taxes): using price per square foot as a metric ($/SF), luxury properties with full amenities tend to maintain monthly carrying costs in the realm of ~$2.25 - $3.00/SF. There are always exceptions, so each property needs to be analyzed individually; however, if the monthlies fall significantly outside of this range, it should be cause for deeper due diligence. High carrying costs drive away most buyers, so it is important to determine whether there is an ongoing problem that should be avoided altogether, or a temporary problem that is slated to be remedied. Litigation: the most common is litigation from the building’s board going after the sponsor of a new development, typically for “construction defects.” While sometimes this is merely an attempt to gain extra reserve funds after the building has been established, if valid, it can also be a sign of serious defects that the building may continue to discover over the course of its lifespan. Regardless of the physical issue, ongoing litigation can have a major effect on ability to obtain financing on the building, or any unit within it. When this is the case, buyer demand is decreased as the only options are specialty financing, or purchasing all cash. This almost always has a negative effect on valuation and sales prices. Try to punch holes in the property. Ask yourself: is there anything wrong with this unit? If these characteristics are met, it is a “good” property, and will always be attractive to renters or buyers which makes it a relatively liquid asset. The ability for a quick sale boosts value because you can time the market when you want to sell, and you will benefit from having a large asset that can be leveraged, that can be easily converted to cash within 30-90 days.
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Co-ops Closing cost estimates for the purchaser
GOVERNMENT
BUILDING
BANK
ATTORNEY
FEE
Your Attorney
ESTIMATED COST
Consult your attorney (~$2,500+)
Points
0%-3% of loan value*
Bank Application, Credit Check, etc
$400-$600
Bank Attorney
$900-$1,500
Mortgage Origination Rate
0-3% of loan amount*
UCC 1 Filing
$125
Appraisal
$300-$1,500**
Lien Search Fee
~$350
Board Package Processing Fees
$500-$2,000
Credit Check Fee
$100-$300 per buyer
Move-in Fee
$250-$500
Move-in Deposit
$500-$1,000 (refundable)
Maintenance Adjustment
Pro-rated for the month of closing
Recognition Agreement Fee
$200-$300
Miscellaneous Co-op Charges
Varies by building. Consult the cooperative's transfer agent & board package
Mansion Tax
1% of all sales of $1M or more
Non-Deed Transfers (i.e., Co-ops)
$50
*varies depending on lead product/program selected
**varies based upon size of loan and lender
Co-ops
ESTIMATED COST
BROKER
Broker
6%
BANK
Payoff Bank Fees
$500-$1,000
Your Attorney
Consult your attorney (~$2,500+)
Co-op's Attorney/Managing Agent Closing Fee
$400-$1,000
Move-out Deposit
Varies by co-op, typically $500-$1,000 (refundable)
Move-in Fee
$500-$1,000 (non-refundable)
Admin Fee
$250-$1,000
Flip Tax or Transfer Tax
Refer to managing agent (typically 1-3% of price or $ per share)
Residential NYC Transfer Tax: up to $500,000 * $500,000+
1% 1.425%, plus filing fee of $100
NY * State Transfer Tax
0.4% of purchase price
Transfer Tax Filing Fee
$100
UCC-3 Filing Fee
$125
GOVERNMENT
BUILDING
FEE
ATTORNEY
Closing cost estimates for the seller
*varies depending on lead product/program selected
**varies based upon size of loan and lender
Condominiums
ESTIMATED COST
BROKER
Broker
6%
BANK
Payoff Bank Fees
$300-$1,000
Your Attorney
Consult your attorney (~$2,500+)
Managing Agent Closing Fee
$500+
Move out Fee
$500-$1,000
Move out Deposit
$500-$1,000 (refundable)
RECORDING & CLOSING
GOVERNMENT
BUILDING
FEE
ATTORNEY
Closing cost estimates for the seller
* Residential NYC Transfer Tax: up to $500,000 $500,000+
1% 1.425%
* NY State Transfer Tax
.4% of purchase price
NYS Equalization Fee
$75
Pick up/Payoff Fee to Title Closer
$250-$500
Pick up/Payoff Fee to Title Closer
$250-$500
*NYC & NYS Transfer Taxes are paid by the purchaser in case of a new development
Condominiums
BUILDING
BANK
ATTORNEY
Closing cost estimates for the purchaser
FEE
ESTIMATED COST
Your Attorney
Consult your attorney (~$2,500)
Points
0%-3% of loan value*
Bank Application, Credit Check, etc.
$400-$600
Bank Attorney
$900-$1,500
Appraisal
$300-$1,500*
Tax Escrow
Typically 2-6 months of property taxes**
Homeowners Insurance (HOI)
$400-$1,000 per year
Mortgage Tax (if less than $500,000)
1.80%
Mortgage Tax ($500,000+ on 1-3 family dwellings)
1.925%
Mortgage Origination Rate
0-3% of loan amount*
Mortgage Title Insurance
.5%-.8% depending on purchase price and loan amount
Board Package Processing Fees
$500-$2,000
Move-in Fee
$250-$1,000
Move-in Deposit
$500-$1,000 (refundable)
Common Charges Adjustment
Pro-rated during the month of closing
Condo Credit Check
$300-$500 per buyer
*varies depending on lead product/program selected **varies based upon size of loan and lender
Professional Team Together with your real estate agent, each member of your team plays a vital role in the process, and a cohesive team will ensure that you get to the closing table quickly and smoothly. Whomever you ultimately choose to have on your team, it is important that they not only work well together, but that they are experienced in dealing with NYC real estate transactions. Sometimes, the wrong or inexperienced professionals can create problems or allow common or minor issues to derail a transaction that could have otherwise been avoided with the right professional. To avoid this, your real estate agent can recommend the right professionals for you.
Mortgage Professional If you intend to obtain financing for a purchase, it is important to choose a mortgage professional who is both experienced in the type of property you are considering and is overtly proactive throughout process. The person you choose is critical - even if a bank canget it done, it may be a rough process, or not happen at all, with the wrong banker. Whether you choose a mortgage broker or a banker from a specific lending institution, both can be a good route for your financing needs, and can provide good rates and a smooth, successful process if you choose the right professional. Note: many lenders can match or exceed competitive rates, which is why it is important to develop a relationship with a good loan officer in order to attain the best advantage. Once you have found your mortgage professional, it is important to get pre-approved for financing from the beginning for several reasons: 1 to determine your maximum buying power, 2) to confirm whether your credit report and current financial arrangement is sound, or whether any action is suggested to make you a stronger candidate; 3) your pre-approval letter is an important component of your offer as it proves that you are a qualified buyer, and a good choice for the seller.
Professional Team Real Estate Attorney Filling an invaluable role, the attorney ensures that the terms and language in your purchase contract are written in your best interest, based on the terms agreed upon in the offer. They also conduct due diligence related to how the building and financials are managed, capital improvements and maintenance, and any other insights they can gather. The best attorneys have extensive experience specifically in residential real estate transactions of condos and co-ops in NYC. Choosing someone out of market or from a different specialty puts you at a disadvantage, and adds risk to the success of your transaction. Note that while you will not be paying the attorney anything to retain them at this moment, it is highly recommended that you speak to them in the beginning of your search to make sure you are comfortable with them representing you on the legal end, and have them ready to go in advance. Whom you retain as your attorney is an important component of your offer, and their contact information will be listed when we submit an offer. The attorney can also go over the fee structure with you to make sure you are comfortable. Any of the attorneys that we recommend have pricing that is in line with the industry average.
Understanding Pricing and Determining Value from a seller’s perspective, and building an offer strategy
While conducting careful analysis of the features and characteristics of a property, as well as data from comparable properties listed, in contract, and sold, it is important to consider several points: Market Value, Listing Price, and the ultimate Sales Price are three distinctly separate factors These three numbers are not necessarily equal and are rarely the same Each of the numbers can fluctuate, are calculated differently, and have different purposes The Listing Price is determined immediately prior to going live on the market and is adjusted as needed. It is intended to be reactive to other listing data that is available Market value: “The most probable price, as of a specified date, in cash, or in terms equivalent to cash, or in other precisely revealed terms, for which the specified property rights should sell after reasonable exposure in a competitive market under all conditions requisite to a fair sale, with the buyer and seller each acting prudently, knowledgeably, and for self-interest, and assuming that neither is under undue duress.” — The Appraisal Institute Listing price: One of the four “P’s” of Marketing, Price is a tool utilized to position the property based on the goals of the marketing strategy. The Listing Price that is chosen will determine the specific segment or segments of prospective buyers that they intend to attract. Pricing is very specific and has a major effect on both the level of exposure to potential customers as well as leverage during negotiations. Sales price: The ultimate sales price is the culmination of the efforts of all prior steps,and their ability to elicit one or more offers on the property. With the appropriate pricing strategy, a properly executed marketing plan, and negotiation tactics, sellers aim to elicit multiple properties if possible, in order to select from offers that exceed both market value and the listing price.
Offer Strategy Differences Based on different pricing strategies
Aspirational pricing: Because the pricing is higher than the estimated market value, and is also higher than any comparable properties, inquiries and viewership traffic will be suppressed. This is due in part to falling above the price bands of buyers’ search criteria. Because we are competing with fewer offers, if any others at all, we can be most aggressive with our offer terms in the hope of achieving a sale price well below the listing price and market value. Sometimes, overpriced sellers are just not serious about selling, and simply will not negotiate down to market value. Other times, we may not be competing with other offers in the beginning, but after negotiating down, other offers come into the picture and turn the environment into a multiple bid situation, which gives the seller leverage, and ends up raising the ultimate sale price. Market pricing: Priced within the range of other comparable closed sales and on market listings, this gives exposure to many of the buyers who are looking for this type of property. It shows to the agent and buyer community that the seller is realistic about being competitive with the market, and is serious about selling the property. Furthermore, pricing on the lower end of the range presents the property as a “good deal”, relative to the others, which in turn makes it a priority for other buyers to view. In these situations, if you like the property, it is already a “good deal” just to secure the property at all. Depending on the competition, there may be room for a little bit of extra negotiation, but most of the time, our best advice is to make a reasonable offer in order to minimize negotiations back and forth, in order to get an accepted offer as quickly as possible. Under market: Priced ~5-10% below market value, with proper staging and marketing, it is made clear to most buyers that this property is the “best deal” on the market and cannot be missed, which will attract multiple bids after the first few showings, if not before. This strategy typically leads to a competitive bidding war, with many offers coming in well above asking price, and very likely surpassing the estimated market value. If a property meets all fundamentals, bidding 5-10% over the asking price (if not higher) is well within reason, since that is likely around the market value anyway. Bidding high and winning the bidding war is of utmost importance as it keeps you in control. Keep in mind the most competitive offers have high prices, few or no contingencies, minimal financing or all cash, and are able to quickly sign contracts and close on the property. Our strategy to beat the market: Utilizing our proven 3-Step method, we are able to get you the best terms possible, and secure the property for you. 1) Offer Due Diligence, 2) Build Equity with Agent and Sell Your Offer, 3) Utilize Expert Negotiation Techniques to get offer accepted
Anatomy of an Offer
Once you have found a suitable property, the next step is to craft and submit an offer. The following information is to be included in the offer, along with the attachments listed below. We have also included a sample offer on the next pages as an example. Following pages: • Sample Offer • Real Estate Board of New York (REBNY) Financial Statement (linked here in the PDF version of this guide) • Mortgage lender pre-approval letter Offer information included: • Name of all prospective buyers (any co-owners involved with the purchase) • Offer amount • Is there a guarantor involved in this purchase? • Amount to be financed • Contingent on financing? If so, % contingent • Will the buyers conduct an inspection prior to contract signing? • Offered closing date • Intended use of the property (primary residence, second home, investment, other) • A short bio that puts you in the best light • Buyer’s NYC real estate attorney contact information - remember, having a local, reputable attorney helps solidify your offer as it conveys to the seller that you will have quick and smooth dealings during contract negotiations and closing. If applicable: • Any pets that will live in the unit • Do you need to sell in order to buy? Include details • Will any part of this purchase be gifted?
Sample Offer p1
Hi Samantha Silver (Seller’s Agent), Please confirm receipt of this email. Hope this finds you well. On behalf of our clients Billy Green and Lori Blue, we are pleased to present an offer in the amount of $900,000 for the subject apartment. They are excited about the property and to join this community. Offer Terms: -
$900,000 purchase price Buyer intends to finance 80% of the purchase price Contingent to 70% financing Inspection to be done prior to contract signing Seller to pay any transfer fees Closing on or about 60 days
Attachments: - REBNY Financial Statement - Mortgage Pre-Approval Letter Bio: Both professionals, Lori Blue is a Certified Public Accountant working for a respected accounting firm, Golden Accountants LLP for the last 5 years in their tax department. Billy, a seasoned sales executive, has spent the last 15 years of his career in finance, currently working for Capital Analytics as a Senior Account Executive. Prior to starting their lives together, Lori was raised in Miami, FL and attended Northwestern University. Billy, originally from Portland, ME spent some of his childhood in Albany, NY and attended University of California Los Angeles. Lori and Billy have been living in Hell’s Kitchen for the last 4 years, and as they embark on the next stage of their lives, they are now looking to put down some roots and make their home. They love the Upper West Side, and are excited for the opportunity to move to such a wonderful home in such a warm community.
Sample Offer p2
Administrative: We would like to go into contract as soon as possible and appreciate a prompt response to proceed. Larry Lavender, P.C. has been retained and is standing by to receive the purchase contract, offering plan and financials for immediate action. Attorney: Larry Lavender, Esq. Managing Attorney: Law Firm of Larry Lavender, P.C. 201 West 72nd Street, Suite 7L, NY, NY 10023 Tel: (212) 885-7171 Fax: (212) 885-7170 Email: Larry@LavenderLaw.com Please let me know if you have any questions, and we look forward to hearing from you soon. If you can give us an idea of when we should expect a response from the seller, that would be much appreciated.
Regards, Evan Jaquias-Johnson and Jeffrey Schoman, Esq. Licensed Associate Real Estate Brokers The Schoman | Johnson Team At Compass Real Estate 90 Fifth Avenue New York, NY 10011 M: 347.280.3826 SJT@Compass.com Lic.#10301212048 | REBNY Member Certified Negotiation Expert
REBNY Financial Statement Applicant:
Billy Green
Co-Applicant:
Lori Blue
Address:
247 West 46th Street #1902
Address:
Same
New York, NY 10036 The following is submitted as being a true and accurate statement of the financial condition of the undersigned on the: 15th day of
March
2016
ASSETS
LIABILITIES Applicant
Co-Applicant
Applicant
Co-Applicant
Cash in banks (Schedule A)
($
150,000.00) ($
200,000.00)
Notes Payable (Schedule E)
-
-
Money Market Funds
($
250,000.00) ($
230,000.00)
To Banks
-
-
Contract Deposit
($
- ) ($
- )
To Relatives
-
-
Investments: Stocks and Bonds
($
- ) ($
- )
To Others
-
-
Installment Accounts Payable:
-
-
(Schedule B) Investments in Own Business
($
- ) ($
- )
Automobile
-
-
Accounts and Notes Receivable
($
- ) ($
- )
Other
-
-
Other Accounts Payable
-
-
Mortgages Payable on Real Estate
-
($
Unpaid Real Estate Taxes
-
-
Unpaid Income Taxes
-
-
Real Estate Owned (Schedule C) Automobiles:
($
- ) ($
50,000.00)
Year 1957 Make Chevrolet
Bel Air
Personal Property and Furniture
($
Life Insurance
($ 1,000,000.00) ($ 1,000,000.00)
Chattel Mortgages
-
-
Cash Surrender Value
($
350,000.00) ($
400,000.00)
Loans on Life Insurance Policies
-
-
Retirement Funds/ IRA
($
220,000.00) ($
371,000.00)
(Include Premium Advances)
-
-
401K
($
107,000.00) ($
139,000.00)
Outstanding Credit Card Debt
-
-
KEOGH
($
- ) ($
- )
Other Debts (Schedule G)
-
Profit Sharing/ Pension Plan
($
- ) ($
- )
TOTAL LIABILITIES
- ) ($
- )
Other Assets (Schedule D) $2,077,000.00)
$2,390,000.00)
COMBINED ASSETS
$4,467,000.00)
SOURCES OF INCOME / MONTHLY
$350,000.00)
$2,077,000.00)
$2,040,000.00)
COMBINED LIABILITIES
$350,000.00)
PROJECTED EXPENSES / MONTHLY
Applicant Base Salary
$0.00)
NET WORTH
TOTAL ASSETS
Co-Applicant
Applicant
Co-Applicant
Maintenance(CC+RET)-this property $1,500.00
-
Apartment Financing-this property
$3,500.00
-
Other Mortgages
-
-
0
Bank Loans
-
-
0
Auto Loans
-
-
Other Income Including Gifts
Other:
-
(Schedule H)
TOTAL
($
150,000.00)
$220,000.00
0
0
Overtime Wages Bonus and Commissions
$385,000.00
Dividends and Interest Income
$190,000.00
0
Real Estate Income (Net)
0
TOTAL
$535,000.00)
$410,000.00)
GENERAL INFORMATION Personal Bank Accounts at
Savings and Loan Accounts at
Purpose of Loan
350,000.00)
(Schedule F)
Applicant Chase, BofA
-
Mortgage for primary residence
$5,000.00)
$0.00)
COMBINED TOTAL
$5,000.00)
CONTINGENT LIABILITIES Co-Applicant Citibank, Wells Fargo
-
Mortgage for primary residence
An Endorser or Co-maker on Notes
no
Alimony Payments (Annual)
no
Child Support
no
Are you a defendant in any legal action?
no
Are there any unsatisfied judgments?
no
Have you ever taken bankruptcy? Explain:
no
Itemi ed Schedules le
e
clude e
c
e e
d
l ud
e
e u ed
u c
c
d
A: ITEMIZED SCHEDULE OF CASH Applicant or Co-Applicant
Financial Institution
Type o Account
Billy Green
Chase
Checking
Account Balance $25,000.00)
Billy Green
Bank of America
Savings
$125,000.00)
Lori Blue
Citibank
Checking
$60,000.00)
Lori Blue
Wells Fargo
Savings
$140,000.00)
B: ITEMIZED SCHEDULE OF STOCKS AND BONDS Amount/ No o Shares
Description
Marketa le alue
Non-Marketa le alue
0
0
$0.00)
$0.00)
C: ITEMIZED SCHEDULE OF REAL ESTATE Description and Location
Date Ac uired
Condo Investment Rental: 350 Albany 02/22/2012 Street 3L
Cost
Actual alue
Mort a e Amount
Maturity Date
$500,000.00)
$620,000.00)
$350,000.00)
2022
Residential or Commercial I commercial, what are the ross rents
Monthly Operatin Costs $1,300.00)
$3100 / month
D: ITEMIZED SCHEDULE OF OTHER ASSETS Description
Amount
-
-
E: ITEMIZED SCHEDULE OF NOTES PAYABLE To Whom Paya le
Date
Amount
Due
Interest
Pled ed as Security
-
-
-
-
-
-
F: ITEMIZED SCHEDULE OF MORTGAGES PAYABLE To Whom Paya le
Mort a e Amount
Principal Remainin
Maturity Date
Wells Fargo
$400,000.00)
$350,000.00)
02/2022
G: ITEMIZED SCHEDULE OF OTHER LIABILITIES Description
Amount
Date
Payments
Security
-
-
-
-
-
H: ITEMIZED SCHEDULE OF OTHER INCOME Source
Amount Last Year
-
Is this recurrin
-
-
IF YOU ARE A PRINCIPAL OF OR ARE EMPLOYED BY A FAMILY BUSINESS, PLEASE COMPELTE THIS SECTION: Applicant
Co-Applicant
Dividend or partnership income (present year)
-
-
Dividend or partnership income (prior year)
-
-
Dividend or partnership income (second prior year)
-
-
The foregoing application has been carefully prepared, and the undersigned hereby solemnly declare(s) and certify(s) that all information contained herein is complete, true, and correct. The information is submitted as being a true and accurate statement of the financial condition of the undersigned on the 22 day of February , 20 16 . 03/15/2016 Applicant
Date 03/15/2016
Co- Applicant
Date
cv July 26, 2016
Loan # 001124350452 Billy Green & Lori Blue 247 West 46th Street, #1902 New York, NY 10036 Dear Billy Green and Lori Blue: Congratulations, based upon the information you provided, your mortgage request is conditionally approved1 for the loan outlined below. Please refer to your Welcome Letter within the Welcome Package; it contains instructions and next steps that once completed will allow us to proceed with your loan request. Details of your transaction: Property Address: Property Type: Mortgage Amount: Sales Price/Estimated Value: Mortgage Type: Mortgage Product: Interest Rate: Discount Points (Points): Term: Rate Commitment Option: ARM Margin:
Pre-Approval New York, NY 10028 Condominium $ 1,796,000.00 $ 2,245,000.00 Conventional 30 Year Fixed 3.625 0.000 360 months 60 Day Float 0.000
Thank you for choosing Citibank and providing us the opportunity to serve you. If you have any questions regarding any of the above information, please call me at, (917) 239-8010.
Sincerely, i hael a enta NMLS # 123456
1 If
ort a e Banker
you have applied for an FHA or VA loan, your approval is contingent upon meeting FHA / VA requirements.
For TTY services, dial 711 from the United States or 1-866-280-2050 from Puerto Rico.
MB5227Z POS Pre-Approval Letter
Page 1 of 1
Rev. 06/2015
FAQs Who pays the buyer’s agent? The seller. The commission is specified in the seller’s agent’s listing contract. The seller’s agent agrees to share the listing with the brokerage community in order to promote and maximize exposure of the property. When a prospective buyer has their own agent, the seller’s agent simply splits the commission with the buyer’s agent. When there is no buyer’s agent, the seller’s agent simply keeps the contracted commission in its entirety. *Nearly all transactions in NYC involve a buyer’s agent and a seller’s agent. Why not go directly to the listing agent? The listing agent represents the seller. Their legal requirements as a fiduciary to the seller are to market the property in order to attract one or more buyers and negotiate the highest price and best terms for the seller, not you. A good property will attract multiple buyers - some will have buyer’s agents, some won’t. The agent and seller will ultimately choose to sell to the least risky, most qualified candidate, with the best terms. This means a combination of: offer price, timeframe, financial qualifications, preparedness, and the strength of the buyer’s professional team. Without an agent whose only role is to represent the buyer in the home-buying process, there’s very little way to eliminate what can be the inevitable doubt that your interests are the first and foremost consideration. Each property has a commission that is already pre-determined in the listing contract, whether the buyer has an agent or not. Thus the buyer is paying, and when they’re not being represented, is paying for a service they are not receiving. If working with the seller’s agent whose fiduciary responsibility is to the seller only, why pay for something you do not receive? Why work with a buyer’s agent? An exclusive buyer’s agent does not have a vested interest in any one particular property and therefore provides unbiased advice to a buyer. That includes bringing meaning to the numbers and informing buyers whether a property is fairly, under or overpriced. Given the high-stakes nature of buying NYC real estate, anything a buyer can do to maintain the highest level of trust in the process will help tamp down the anxiety inherent in the buying process. The benefits to having a buyer’s agent work for you include: • Unbiased representation • Negotiation expertise tailored to buyers’ needs • Neighborhood or building experience with knowledge of comparable sales, availability, neighborhood data, market values • Time-saving aspect, since an exclusive buyer’s agent has a vested interest in moving along mortgage, insurance, and inspection paperwork.
FAQs Your agent’s experience, reputation in the industry, and level of professionalism are very often what give you an edge in getting an offer accepted, or in winning during negotiations. These subtle, intangible factors can be the difference between winning a bidding war or not, or in negotiating tens to hundreds of thousands of dollars or more in savings. Case Study: 201 West 72nd Street #7L Listing price: $639K | Highest Offer: $700K | Closing Price: $670K Out of the 14 offers received, the seller ultimately choose an offer in the middle of the range due to the buyer’s strong financial qualifications, and the buyer’s agent’s professional correspondence and dealings with us. This included their comprehensive offer and pre-existing relationship with a buyer they had represented on multiple transactions in the past which made this offer the most likely to get to a signed contract, and ultimately the closing. At the end of the day, a high offer price on it’s own merits means nothing without the instilled confidence that the transaction will ultimately close. Working with multiple agents All agents have access to all listings in NYC, so it is not necessary to have multiple agents sending you the same search results. In fact, working exclusively with one agent helps them to truly get to know you and understand your wants and needs so that you can achieve success. Additionally, you will get their full attention and dedication as they know they are not competing with anyone else, and that you have mutually agreed to work together to fulfill your goals. Keep in mind that not all agents are created equally, as they have drastically varying levels of knowledge, expertise, skill-sets, and experience which will have a direct impact on the outcome of your home search, and whether it results in a successful purchase or not. Choosing the right agent is of paramount importance! It is important to do your due diligence, interview, and vet your agent so that you can comfortably make an informed decision as to who will best represent you. It is best to find an agent whom you like, trust, and work well with as you will ultimately only have one agent negotiating for you and representing you on a transaction. Together, you will successfully be able to purchase your next home. In the future when it is time to sell your property, it is important to once again choose the best agent team to develop and execute the best strategy to successfully sell your property and yield you the highest profit in the shortest amount of time. What if I’ve already seen the property or with another agent? By law in New York State, it is your right as a buyer to choose a real estate broker to represent you during a transaction. You can generally choose or switch your broker or agent (if you need to) up until the contract is signed.
FAQs However, be aware when viewing properties and when signing any documents or registration forms as some listing brokers or sales offices may attempt to prevent you from choosing to have broker representation later if you initially view the property without an agent. *This is the exception, not the rule. You should always disclose your broker representation to all parties, and when making an offer. Do you have “off-market” listings? Yes. However, the seller typically benefits, and the buyer typically pays a substantial premium for the property. Without such a premium, the seller is better served by listing the property on the market. Some reasons why properties sell “off-market” include 1) privacy for one or both parties to avoid press and media attention, 2) no need to sell, but the offer is too good to pass up (generally well above market), 3) the property is very specific or has a specific use, e.g. next door apartment to do a combination, and the buyer is willing to pay a premium.At the end of the day, a high offer price on it’s own merits means nothing without the instilled confidence that the transaction will ultimately close.
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