New York City Home Buyers Guide

Buyers Guide A helpful guide to New York City’s home buying process.

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Hello Like everything else in New York City, buying a home is way more stressful and complicated than it needs to be. But, it can also be a very fun and exciting process, and there’s nothing that gives me more pride in my work than helping someone realize their dream of owning property in New York. My promise to you, the buyer, is to be your fiercest advocate and to empower you with the tools you need to feel confident that you are purchasing the perfect home or investment. Reading through this guide will answer many questions, but it may also raise new ones. So please don’t ever hesitate to reach out. I am always here to assist you.

Professional Services include Pre-Purchase Counseling Session

Expert Negotiation Guidance to

to go over your individual needs

assist you through the offer and

and create a personalized game

contract negotiation process. I work

plan for your purchase.

to protect your best interests.

Daily Property Updates direct to

Investment Insights and market

your in-box and phone. Get insider

data analysis using Urban

information on the best new listings

Compass’s industry-leading market

as soon as they hit the market.

reporting and data tracking systems.

Board Package Preparation to

Neighborhood and Market

assist you in properly assembling

Education to help you determine

and presenting your application

which areas, price-range and types

package to the board of directors.

of buildings might be right for you.

Advice on Selecting an Attorney

Renovation Consultation to help

as well as a referrals to top-notch

reimagine space and maximize the

mortgage brokers, contractors,

design, usefulness and resale value

interior designers and more.

of your unit.

First-time Buyer Program provides

Lifetime Concierge Services

an extra level of support and

offering continued access to the

guidance for newer buyers and

finest local services and real estate

their families.

related support.

A 5 Step Guide to the purchasing process of a co-op or condo

1

SEARCH • Decide to purchase a home and meet with your agent • Get pre-qualified for a mortgage • Visit properties and find your dream home

2

NEGOTIATION • Negotiate with seller on price & terms • Attorney reviews contracts and related documents • Sign contract and put down 10% deposit

3

APPLICATION • Complete loan application and bank appraisal is performed • Work with agent to complete and submit board package • If co-op, interview with co-op board • Purchase approved by board

4

FINALIZATION • Bank issues clearance to close • Closing scheduled by attorneys • Final walk though with agent

5

CLOSING • You are now a home owner.

Do a happy dance.

S C OT T ’S T IP The typical time frame from finding a home to the closing date is approximately 1-4 months.

Co-op vs. Condo New York City’s housing supply is made up of two main types of buildings: Cooperatives (Co-ops) and Condominiums (Condos). This simple chart below breaks down the major differences between them, and can be used to help determine which option is right for you.

CO-OP

CONDO

COST

Typically cheaper than a condo.

Lower closings costs than a condo.

Typically more expensive than a co-op.

Higher closing costs than a co-op.

SUPPLY

75% of NYC’s housing supply.

Typically built before the 1980s.

Most pre-war buildings are co-ops.

25% of NYC’s housing supply. Typically built after 1980s. Most modern new construction is condo.

BUILDING CULTURE

Most units are owner-occupied.

More controlled & stable.

Mix of owners and renters.

More laid back.

APPROVAL PROCESS

Very strict and thorough.

Personal interview required.

Can take up to 3-4 months.

Less rigorous than a co-op. No board interview required. Quicker to approve. Buyer can purchase as an LLC.

TYPE OF OWNERSHIP

Indirect – Stock certificate & Lease. Buyer owns shares of stock in the co-op corporation and receives a lease to occupy their apartment.

Direct – Deed. Buyer owns real property, the same as buying a house, and receives a deed.

MONTHLY PAYMENTS (Used for building expenses)

Referred to as “Maintenance.”

The maintenance amount includes real estate taxes. Some of the monthly maintenance is tax deductible (see Tax Benefits).

Referred to as “Common Charges” Real estate taxes are paid separately.

TAX BENEFITS

Personal tax deductions can be taken for owner’s share of building’s real estate taxes and mortgage interest, which are part of the monthly maintenance payments.

Individual property taxes are deductible and some new construction buildings may have additional tax abatements.

RENTING OUT YOUR UNIT

Limited, if allowed at all.

Easy and unrestricted.

INVESTOR FRIENDLY

Rarely.

Yes.

RENOVATIONS

Renovations must be approved by co-op board.

Renovations must be approved by condo board.

EASE OF RE-SELLING

New buyer must be approved by co-op board, and can be denied for any reason.

New buyer can rarely be denied.

TYPE OF PURCHASER

Personal residence.

Personal residence, investor, foreign buyer Parent buying for children.

Board Package Must-Haves Whether applying for a co-op or condo, the following pieces of paperwork will need to be submitted as part of your board package application.

MORTGAGE PREQUALIFICATION LETTER

COMPLETED FINANCIAL STATEMENT

EMPLOYMENT LETTER

TAX RETURNS

Provided by lender

Statement of personal assets & debts

Stating position, start date, salary and bonuses

Last two years’ federal returns

PAY STUBS

PERSONAL REFERENCE LETTERS

PROFESSIONAL REFERENCE LETTERS

LANDLORD/MGMT CO. REFERENCE LETTERS

Last three paystubs

From friend or family member, on letterhead

From current or former colleague, on letterhead

Stating you are in good standing

BANK STATEMENTS

BROKERAGE/ INVESTMENT STATEMENTS

Two most recent bank statements

Two most recent brokerage statements

BEING PREPARED = LESS STRESS THINGS YOU SHOULD DO RIGHT AWAY: Enlist the services of an experienced broker Contact a mortgage professional to get a preapproval letter Gather last three years’ federal income tax returns

S C OTT’S TIP MY MOST SUCCESSFUL BUYERS ARE MY MOST PREPARED BUYERS.

Request reference letters from three friends, three professional contacts, and your landlord or property manager Get a letter of employment from your company or if you are self-employed, a letter from your accountant stating job title and income

Selecting the Right Attorney I can’t stress this point enough. Please please PLEASE only work with an attorney who specializes in NYC Co-op and Condo sales. Many clients are tempted to use the services of a friend or relative, such as uncle “Steve” who lives and works mostly upstate or college pal “Linda” who is a general practice attorney. In my experience, this never works out. Your attorney’s job is vital to protecting your interests and they have an incredible amount of complicated paperwork to review on your behalf. Therefore, you want to select an attorney that does these types of transactions every day. If needed, I am happy to provide the contact information for several excellent attorneys that I can refer you to with confidence.

Pre-Qualify For Your Mortgage There are many different ways to finance the purchase of your new home, so it is best to speak with a mortgage professional right way.

They will be able to provide you with the following:

Contact info for Preferred Mortgage Professionals:

• • • • • •

Ron Riemer Vice President | The Federal Savings Bank rriemer@thefederalsavingsbank.com Office: 212-692-8388

Pre-qualification Letter (needed to submit with your offer) Which financing product is best for your situation An idea of your maximum budget The amount you can afford for monthly payments What minimum down payment is needed Benefits of higher down payments

Scott van der Marck Private Mortgage Banker | Wells Fargo scott.vandermarck@wellsfargo.com Office: 917-260-1665

Home Insurance Home insurance must be purchased to insure your home and personal property against damage and to limit your liability in the event of an accident on your premises. Your building or mortgage bank will most likely have a minimum requirement for the amount of insurance you must get, so please check with them before purchasing. Also, keep in mind any storage unit or jewelry/art collection/silverware that might require additional insurance.

S C OT T ’S T I P Learn the difference between Actual Cash Value (ACV) and Replacement Cost (RC) coverage. ACV coverage will be cheaper, but will rarely reimburse you for the full cost of replacing damaged property.

Closing Cost estimates for the purchaser

Co-ops FEE

ESTIMATED COSTYour attorney

MY APPROXIMATE COST

Your attorney

$1,500–$3,000

$

Board Package Processing Fees

$500–$2,000

$

Lien Search Fee

$200–$300

$

Maintenance Adjustment

Pro-rated during for the month of closing. $

Move-in Deposit

$500–$1,000

$

Mansion Tax

1% of price for all sales over $1,000,000

$

IF FINANCING, THESE ADDITIONAL COSTS APPLY Bank Application, Credit Check, etc.

$400–$600

$

Appraisal

$300–$1,500

$

Bank Attorney

$500–$800

$

Recognition Agreement Fee

$200–$300

$

UCC 1 Filing

$75

$

This closing cost guide is designed to give you the general costs associated with purchasing a property in NYC. Please note that the above information may not represent the entirety of potential costs, and should be used only as a guide. Potential buyers should consult with their real estate attorney or financial advisor for specifics.

Closing Cost estimates for the purchaser

Condominiums FEE

ESTIMATED COST

MY APPROXIMATE COST

Your attorney

$1,500–$3,000

$

Board Package Processing Fees

$500–$2,000

$

Title Search + Insurance

0.4%–0.8% depending upon the purchase price and financing

$

Recording Fees

$100-$200

$

Title Closing Agent

$100-$400

$

Municipal Search

$350–$500

$

Common Charges Adjustment

Pro-rated during for the month of closing

$

Real Estate Tax Adjustment

Pro-rated amound depends on when the tax is collected.

$

Move-in Deposit

$500–$1,000 (refundable)

$

Mansion Tax

1% of price for all sales over $1,000,000.00

$

IF FINANCING, THESE ADDITIONAL COSTS APPLY Bank Application, Credit Check, etc.

$400–$600

$

Appraisal

$300–$1,500

$

Mortgage Recording Tax

$

< $500,000

1.8% of purchase price

$

> $500,000

1.925% of purchase price

$

Bank Attorney

$500-$1,500

$

Tax Escrow

2-6 months of taxes

$

IF PURCHASING DIRECTLY FROM SPONSOR (TYPICALLY IN NEW CONSTRUCTION) New York Transfer Tax

1.825% of purchase price

$

Sponsor’s Real Estate Attorney

$1,500 –$3,000

$

Reserve Fund Contribution

2+ months of common charges

$

This closing cost guide is designed to give you the general costs associated with purchasing a property in NYC. Please note that the above information may not represent the entirety of potential costs, and should be used only as a guide. Potential buyers should consult with their real estate attorney or financial advisor for specifics.

Key Terms APPRAISAL Assessment of the property’s market value, typically done for the purpose of obtaining a mortgage.

CO-OP SHAREHOLDER The technical term for the owner of a co-op unit, since what they are actually purchasing are shares of stock in the co-op corporation.

COMMON CHARGES Monthly fess paid by condo owners to cover building upkeep and staff salaries. Property taxes are not included in the common charges and are billed separately.

DEBT TO INCOME (DTI) RATIO The percentage of an individual’s monthly gross income relative to the amount of debt owed. Co-ops typically require a DTI of no more than 25-29%.

ESCROW DEPOSIT Money put aside in the custody of a third party, which will only be delivered once certain conditions have been met.

LIEN SEARCH A thorough background check on the property and the seller, to ensure there are no outstanding debts or claims upon the property which could interfere with the sale.

MAINTENANCE CHARGES Monthly fees paid by co-op owners to cover the building’s operating expenses, real estate taxes and mortgage payments. Portions of this payment are tax-deductible.

POST-CLOSING LIQUIDITY Refers to the amount of cash the buyer must have on hand after deducting the down-payment and closing costs. Many co-ops require buyers to show at least 1-2 years worth of maintenance & mortgage costs.

SPONSOR The person or company who is responsible for developing a new building or converting an existing building to condo/co-op.

TAX ABATEMENT A reduction in real estate taxes for a specific period of time.

Typically done to spur new condo development.