Buyers Guide Basics for NYC
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.
Below are the steps to follow when purchasing a home in NYC. You will want to refer to your real estate professional (me :) ) to help you through each step.
1) Find an Agent
Look for a licensed real estate agent who is knowledgeable about the neighborhoods you’re considering and can help guide your search. They should have a high level of expertise with a proven track record of success.
2) Get Pre-Qualified
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.
3) Visit Properties
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. The more you see, the more your search will narrow until you find the right one!
4) Negotiate
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 agent will provide advice on pricing throughout.
5) Review
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 - due diligence materials including building financials, house rules, offering plans, board minutes, contract and contract riders etc. Therefore, you want to select an attorney who is familiar with these transactions in NYC.
6) Sign Contract and Put Down Deposit
Contract signing is an exciting step. Once you sign the contract you will submit your contract deposit. Typical deposits in NYC are 10% of the purchase price. This locks you and the seller into the deal under the specified terms of the accepted offer.
7) Complete Loan Application
If you are financing your purchase you will then organize an appraisal with your bank. An appraiser will report findings to your lender. You will then get started on providing all of the supporting documentation to your lender to be approved by an underwriter.
8) Prepare Your Board Package
(If you are purchasing a townhouse, skip ahead to Step 10.)
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) Board Approves the Purchase
Condo & Co-op boards typically meet once per month. During their meeting they will follow procedure to make a decision on your purchase application.
10) Bank Issues Clearance to Close
Your lender will provide the clearance to close.
11) Closing Scheduled by Attorneys
The buyers and sellers attorneys will coordinate with the bank, building management representative, you and the seller to choose a date to conduct closing.
12) Final Walk-Through with Your Agent
Your agent will schedule the final walk-through of the apartment prior to closing. Many times this occurs just hours before closing takes place. During the walk-through we make sure the apartment is in the same condition as it was at contract signing, with all appliances in working order, running hot water, electric etc. If you notice the stove has stopped working, we will inform attorneys and they will hold a deposit in escrow at closing until the issue is fixed.
13) Closing
Closing takes between 1-2 hours, usually at the attorneys office. Practice your signature because you will be signing it many times. Congratulations, you are now a home owner!
Key Terms
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-OP SHAREHOLDER
Owner of a co-op unit, since what they are actually purchasing are shares of stock in the co-op corporation.
DEBT-TO-INCOME RATIO
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.
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.
POST-CLOSING
The amount of cash the buyer must have on hand after deducting the down-payment and closing costs.
PRE-APPROVED
Advanced approval from a bank or other lending institution for a home mortgage.
PRE-QUALIFIED
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.