Financing or All Cash

Will you be paying all cash or will you be financing or borrowing money from a financial institution? The last thing you want is to find the perfect place and realize you aren’t qualified enough. A worse situation is when you are qualified, but don’t have everything you need in place and lose the apartment to someone who is 100 percent prepared.

If you are not paying all cash for the purchase of your new home, make sure to first speak with a mortgage broker, mortgage banker, or lender to get a pre-approval letter. This very simple and quick process gives you an idea as to how much you can realistically finance. If you are not a US Citizen, however, this process might be a bit difficult, and there may be other avenues you may have to explore.

If you need to get in touch with a mortgage broker, banker or lender, feel free to contact me and I can give you a few options.

Real Estate Attorney

The next part of getting qualified is having a real estate attorney. Imagine — You’re walking around one day and randomly stop into an open house and fall in love with the apartment. You put an offer in immediately and it gets approved. Unfortunately, if you don’t have a real estate attorney, or if you don’t find one immediately, the seller might go with another buyer because they are unable to send contracts out to what should be the buyer’s attorney. Always be prepared and have a real estate attorney at hand.

If you need to get in touch with a real estate attorney, feel free to contact me and I can also provide you with some options.

Condo or Coop

Even before you figure out where you want to live, you need to determine whether ideally you would like to live in a condo or a co-op . What are the main differences? I’ll give you a brief overview here, but you can also check out my “Co-ops vs Condos In NYC” video for a more in-depth description.

When buying a condo (or a condominium), you are buying an individual piece of real property. You own the apartment in addition to undivided interest in the common area. You are responsible for paying both real estate taxes and common charges. Also there is no underlying mortgage.

When purchasing a co-op (or a cooperative), you are buying shares in a corporation versus owning real property. You pay maintenance, instead of common charges and real estate taxes, which is partially tax deductible.

About 75 percent of apartments for sale in NYC are in co-ops whereas about only 25 percent are in condos. Aside from this percentage, there are many factors that may come into play when deciding between a co-op or a condo. Here are a few:

• First is understanding your timing – When do you need to close by?
• Second – How much money are you able to put down?
• Third – Do you plan on using the apartment as a pied-a-terres
• Fourth – Do you plan on subletting your apartment in the near future?
• Fifth – How much are you willing and able to spend?
• Sixth – Are you buying the apartment for yourself or for someone else? (The difficulty of getting approved)

Generally speaking — and please understand that each building has its own market and its own rules — a condo takes about 1-2 months to close from the day contracts are signed, you usually have to put 10 percent down, pied-a-terres are allowed, sublet policies are pretty lenient — generally offering 12-month leases at a time — it can be 30-40 percent more expensive than a co-op if everything else is the same, and the approval process is much easier since there is no board interview and co-purchasing and guarantors are allowed.

In general with co-ops, it can take from 2-4 months to close from the day contracts are signed, you have to put a minimum of 20 percent down and sometimes up to 50 percent or higher, many co-ops do not allow pied-a-terres, sublet policies can range from being very strict to not allowing sublets at all, it can be 30-40 percent less expensive than a condo if everything else is the same, and the approval process can be significantly more complex and difficult, some of the reasons being because you have to supply much more financial and background information, co-purchasers and guarantors are often not allowed and you have to go through a board interview.

Real Estate Broker

Find a real estate broker. While you can decide to look on your own, there are many advantages you gain by working with a broker. Can you theoretically find an apartment on your own? Of course! But just a few qualities a great broker will have include understanding the market, being able to negotiate the price and terms of the apartment, having access to properties not currently on the market and helping you through the process, which is very underrated. Working with a buyer’s broker is at no cost in almost all cases, so if you’re going to be making one of the biggest investments of your life, why not use someone who is a real estate expert?

Wants Vs Needs

What type of apartment are you looking for? – The truth of the matter is that in the beginning of your search, you may want a 2 bed, 2 bath apartment in a new high-rise building with tons of amenities in Midtown West and may end up living in a 3 bed 3 bath walk-up on the Upper East Side. However, it’s important to have an idea as to what you absolutely need versus what you want. Let’s go over the checklist together excluding what we went over in the co-op vs condo section.

• How big of an apartment do you need in terms of square footage and bedrooms / bathrooms?
• Do you have pets?
• Are you trying to find a sponsor unit? (What is a sponsor unit)
• Do you need a pool, gym or basketball court?
• Do you need a washer/dryer in the apartment or at least in the building?
• Do you need an elevator?
• Do you need a doorman?
• Are you looking for a particular view or exposure?
• How important is the proximity of public transportation?
• Do you need a garage attached to the building?
• Do you need specific finishes?

Offer and Contract

From Making An Offer To Getting Contracts Signed – This is the most exciting, but potentially nerve racking time of the entire process. Prior to making an offer, make sure you have your REBNY financial form filled out and delivered to your buyer’s broker (if you are using one) or to the listing broker if you are not being represented. This shows the selling broker that you are potentially qualified enough for the apartment.

When you make an offer through another broker, the broker is legally bound to submit that offer to the owner. If the offer is low, the owner may counter the offer. However, if the offer is too low, the owner might not respond at all because they are offended by the lowball offer. If there are several offers close to or at the asking price, a bidding war may ensue, driving up the price of the apartment.

After the owner accepts the offer from the buyer, contracts will go out to the real estate attorneys representing the buyer and the seller. Once the language is agreed on by both parties, — which includes closing date, contingencies, price and other terms — the buyer puts an earnest deposit down, contracts are signed and the deal moves onto the next step…

Application and Approval

Depending on how strict the building management is and whether you are applying for a condo or a co-op, this can be the most time consuming part of buying an apartment. Your broker should send you the application and board requirements. While it varies from management to management, you will most likely need to include tax returns, a financial statement with supporting documentation, bank statements, and letters of recommendation along with other information that should be provided on the application form. Condos and sponsor units won’t require interviews, but co-ops will. If you get to the interview part of the co-op process, this is a great sign! After submitting the application and/ or having the board interview, hopefully you will get notification that you have been approved! Now it’s time for the best part…

The Closing

The day is finally here! All that hard work has paid off! The day of the closing is pretty straightforward. You will have a walkthrough of the apartment to make sure that everything is in working order. Then the attorneys, seller, buyer, title rep, buyer’s and seller’s brokers will all meet in a room, drink ice water and tea, and talk about their lives to help pass the time until funds have transferred and everything is signed. Once that is completed the buyer will receive the key and is ready to move in.

If you got to this point, congratulations! You have just purchased your new home! This is a very exciting time in your life!

This is just an overview, but if you have additional questions about the buying process or you are looking to find someone to represent you in buying an apartment, please contact me at Brett@TheNewYorkCityBroker.com.