Buyer’s Guide

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The Preparation
The Search
The Purchase
The Closing
Cooperative Vs Condominium

BUYER’S GUIDE

Purchasing property in Manhattan is a challenging and rewarding undertaking. Many steps are involved in the process, and at the outset the language and mechanics can seem a little daunting. While no single guide can truly prepare your for all the situations that you will encounter, this guide will ground you on the basics of the process and the vocabulary involved in a typical real estate transaction.

One of the essential functions of an experienced broker is to consult with you on the finer points and unpredictable situations that you will come across, and choosing a good broker is the first step once you have decided that you are ready to get serious about making a purchase. There is no reason to re-invent the wheel in this situation, and your broker will be an essential member of the team that must be assembled to complete the transaction. The services of a buyer’s broker cost you nothing, do not require a signature or legal commitment, and can only help you work through this process as smoothly as possible.

We have no illusions regarding your technological power. The Internet has opened up a world of information and listings to the general public, and we embrace this newfound market transparency. In years past, the broker was the gatekeeper into a network of listings and brokers. Now those listings are advertised on competing third-party websites that are easily navigated by anyone with a smartphone. In fact, this flattening of the playing field it makes the broker’s role more clear: we are here to share our insight achieved through years of experience, to provide hand-tailored service for every need that comes up during the process, and to work tirelessly to make the transaction happen once you have identified the right property.

The level playing field of the Internet has created transparency in real estate listings, and it has also created an astounding glut of information surrounding the real estate market. You need a team of experienced professionals on your side to make this transaction happen smoothly, and an essential part of our service is our personal experience with the very best professionals in the business. We know the best attorneys. We know the best mortgage professionals. We know architects, contractors, handymen, financial advisors, and the top professionals in every field in which you could possibly need a helping hand. Our outstanding referral network is priceless, and is another essential tool we employ to secure your new home before the next buyer comes along. All this comes at no cost to you.

We are happy to educate you on the entire process in person. But if you prefer to get started on your own first, here are some essential points that you will need to become familiar with as you begin your search for a new home.

The Preparation:

-Speak with a mortgage lender or mortgage broker, and obtain pre-qualification for a loan. This process will clarify your exact budget so that you can begin your search with concrete, realistic expectations of the initial cash outlay and estimated monthly expenses associated with your upcoming purchase.

-Once you have a good idea of what you can spend, make sure that you have 10% of that purchase price in liquid form. Later on, when you come to an accepted price with the seller of the property you like, you will need to be able to write a check for 10% of the purchase price. The last thing you will want is to jeopardize your purchase by not having easy access to these funds when you need them most.

-Review your credit report, and correct any blemishes to your credit.

-Pay off credit card debt, and clear up as much other debt as you can. Lack of debt will substantially lower your debt-to-income ratio, a particularly important metric for co-op purchases.

-Be prepared to provide documentation of your net worth, including bank statements, brokerage statements, and tax returns. Upon making an offer on a property, you will be required to provide a statement of your net worth with supporting documentation. Any delay in providing this information can potentially create significant problems if there are multiple interested parties in a property, and it is essential to have this information ready beforehand to avoid any potential roadblocks between you and the property you love.

-Choose a Manhattan attorney who specializes in residential real estate. New York requires that buyers and sellers retain attorneys to navigate the complexities of real estate transactions, and you will need someone who deeply understands the process and can carefully expedite it if necessary.

The Search:

-Decide where you want to live. It is worth noting that you will end up spending most of your time in the neighborhood in which you purchase your home. Clearly, you must be completely comfortable living in the home itself.  You must also be comfortable buying a quart of milk at the corner deli, dropping your shirts off at the dry cleaners, and hustling to the subway during rush hour, all in the vicinity of your new home. In order to save your own time (and sanity) during your search, it is essential to seriously think about how your target areas actually feel, and to make some honest decisions about where you realistically feel comfortable living. You will save yourself many future headaches by simply putting together a list of neighborhoods that you are considering, and then taking a nice afternoon to walk the streets of each of those areas and truly imagine yourself there, running day-to-day errands. If you spend a little time thinking about it, you should end up with somewhere between three and five neighborhoods you like, and this will create a reasonable area in which to search so that you will not be needlessly inundated with listings.

-Choose a real estate agent, and work with only that agent. Working with multiple agents will waste your time, as you will inevitably end up with duplicate listings and appointments. Let your agent know that you are only working with him/her, and the agent will prioritize your search. Your agent will be tuned into new listings and price reductions in your range and area, and will immediately get you into desirable properties before the competition arrives.

-Be specific and particular about what you are looking for, and give the agent brutally honest feedback about what you are seeing (after you leave each property, of course).

-Be prepared to move forward quickly once you identify the right property. If you like it, there is a very good chance that another qualified buyer sees its value as well. You want to be the first one to bid and the first one to arrive at an accepted offer. Hesitation can put you at risk of losing the thing for which you’ve spent all this time searching.

The Purchase:

-When you find the property you like, consult with your agent. Once you decide on an opening bid and any conditions, your agent will submit a written offer on your behalf. Your agent will then represent you in negotiations with the seller’s agent, as the offer is negotiated with the seller.

-Once you and the seller agree upon a sale price, the seller’s attorney will deliver a contract of sale to your attorney, who will then review the contract and carry out due diligence to assess the financial condition of the building.

-Once you and the seller agree to the terms of the contract, you then sign the contract and submit a 10% down payment.

-The seller signs the contract, and the seller’s attorney delivers the fully executed contract back to your attorney. It is only at this point that you have a deal. At any time before the seller’s attorney delivers the fully executed contract to your attorney, the seller has the right to entertain and to accept other offers. Therefore, it is imperative that your attorney expedite the due diligence and contract review, in order to reduce the chance of any other offers coming into the mix by delivering a signed contract and deposit as quickly as possible.

-If you are obtaining financing, you must immediately apply for a mortgage. The loan process involves several separate steps, and the bank needs time, sometimes up to 45 days, to complete underwriting in order to secure the loan before you close.

-If you are purchasing a condo or coop, your real estate agent will immediately begin working with you to complete the board application. Board applications typically require reference letters, tax returns, bank and brokerage statements, employment verification letter, mortgage commitment letter, and a personal financial statement. The contract of sale typically stipulates that the board application be submitted within two weeks of the contract signing, and therefore it is imperative that you begin working with your agent on this process as soon as the contract is signed.

-After reviewing the application, the building’s board will typically schedule an interview to review your application in person and to put a face to the paperwork they have just reviewed. For the board interview, you should know your financials ahead of time, dress conservatively, and answer the board members’ questions simply and cordially. Any unnecessary chatter can suggest more than you realize and can be potentially detrimental to your approval, so it is best to stay calmly quiet until you are asked to speak.

-Once the board approves you, typically within 72 hours, your attorney will then finalize the closing date.

The Closing:

-On the morning of the closing, your agent will accompany you to the property to inspect it for any damages. The property should be in the condition promised in the contract, and should be broom clean.

-In preparation for the closing, be sure to bring your driver’s license or passport, your checkbook for any last-minute adjustments, and all the certified checks specified by your attorney.

-For purchases of coops and condops, closings are typically held at the offices of the building’s management company. Attendees include your attorney, the seller, the seller’s attorney, the lender’s attorney, a representative from the management company, and the real estate agents involved in the transaction. You will sign paperwork that finalizes the loan transaction (if you are obtaining financing) and other documents that transfer the stock and proprietary lease from the seller to you.

-For condominium and townhouse purchases, closings are generally held at the office of the seller’s attorney. Attendees include your attorney, the seller, the seller’s attorney, the lender’s attorney, a title company representative, and the real estate agents involved in the transaction. You will sign paperwork that finalizes the loan transaction (if you are obtaining financing) and other documents that convey the property to you, including the deed and the title report.

-In all cases, your attorney will explain in as much detail as you need each document in the impressive mound of paperwork in front of you. And in all cases, once you have signed everything, the seller hands you the keys, and you may shake the seller’s hand and begin enjoying the myriad benefits of property ownership.

A note on ownership – cooperative vs condominium:

The most common form of ownership in Manhattan is the cooperative, an ownership structure not commonly found in other parts of the United States. In a cooperative, the building is actually owned by a corporation, and the owners of individual apartments own stock in this corporation and a proprietary lease of the apartment pertaining to those stocks. The larger the apartment, the more shares that are associated with it, and the monthly maintenance fee of each apartment is calculated based on the number of shares. The monthly maintenance payment goes towards the corporation’s taxes on the building, the building’s underlying mortgage, the payroll for any building employees, and any other expenses that the building may incur. The portion of the maintenance that pays the building’s taxes and mortgage interest payments is generally tax-deductible. Any buyer must undergo a coop board interview, and may be approved or rejected for no stated reason. Board turn downs are generally quite rare for prepared, qualified buyers.

In a condominium, the ownership is similar to the more straightforward ownership of a free-standing home or townhouse. Instead of owning shares, a condominium owner actually owns the apartment’s interior walls, the space inside the apartment itself, and a fraction of the common areas of the building, as spelled out in the deed and the title. Each individual condominium unit is responsible for its own tax bill, and there is a separate monthly common charge that covers the building’s payroll and expenses. A condominium board’s ability to reject a buyer or tenant is extremely limited, and this makes condo ownership much more flexible and generally very desirable. As a result, condos tend to be command higher prices than coops.