Buyer’s Guide
Buying an apartment in NYC can be overwhelming. Our Buyer’s Guide provides useful information that can help you familiarize yourself with the process.
BASIC INFORMATION: • Financing:
Find out how much you can afford by contacting a mortgage broker or lender. Your monthly payments should equal 28% or less of your gross monthly income.
Example: If you make $10,000 gross per month, your monthly payments (including all fees and maintenance) should not exceed $2800 per month.
• Property Type:
Once you’ve established financing, you can start looking for properties in your price range. Determine what factors are important, i.e. size, location, proximity to
transportation and/or work, school, district, and investment capabilities etc. • Condo vs. Co-Op:
When purchasing a condo, you are buying “real” property. This means you get a deed of ownership. A typical down payment for a condo is 10%, there is usually no board approval, and the process can take anywhere from 45 days to 3 months.
When buying in a co-op building, you are purchasing shares of stock in a corporation which leases the apartment back to you in the form of maintenance charges.
A typical down payment for a co-op can run between 20-50% of the full purchase price. Co-ops require a board interview, and the approval process could take 3-4 months. Cooperatives and Condos have processing and move in fee requirements, which range from a couple of hundred dollars and up. There is usually a refundable deposit used to cover damages, if any, which occur during move-in.
• Sponsor Sale:
As an alternative to the purchase of a condo or co-op, you may want to ask your broker about sponsor sales. These can be either a co-op or condo, and generally do not require a formal board approval. In most cases, management approval is enough, and the process usually takes less time.
ESTIMATED FEES:
• Cooperative Apartments:
NYC Transfer Tax: 1.00% of price up to $500,000 & 1.425% of entire price when it
exceeds $500,000.
NY State Transfer Tax: 0.4% of entire purchase price. Managing Agent: Fees vary.
Flip Tax: Specific to buildings, consult the managing agent
Stock Transfer Tax: Varies by building, consult the managing agent Move Out Deposit: Varies by building, consult the managing agent. For Purchaser; Attorney Fee: Approximately $2000
Bank Fees/Application/Credit/Appraisal/Bank Attorney and Other Fees: $1600 +/- Move-In Deposit: Varies by building, consult the managing agent
Managing Agent or Co-op Attorney Fee: Varies by building Lien Search: $300
Maintenance Adjustments: One month of maintenance
Mansion Tax: 1% of entire purchase price when said price exceeds $1,000,000
• Condominium/Townhouse:
For Seller; Broker Fees: Typically 6% Attorney Fees: Approximately $2000 Managing Agent: Varies by building
Move Out Deposit Fee: Varies by building, consult the managing agent
NYC Transfer Tax: 1.00% of price up to $500,000 & 1.425% of entire amount when it
exceeds $500,000
NY Transfer Tax: 0.4% of entire purchase price For Purchaser; Attorney Fee: $2000
Application/Credit/Appraisal/Bank Attorney and Other Fees: $1600 +/-
Real Estate Tax: Provide a minimum of 6 months of real estate taxes to be placed in an
escrow account
Recording Fee: $200
Mortgage Tax: 1.75% of mortgage on loans under $500,000 or 1.875% of entire amount
over $500,000
Fee Title Insurance: Approximately $450 per every $100,000 Mortgage Title Insurance: Approximately $200 per every $100,000 Managing Agents Fee: Varies
• Multi-Family Residential:
For Seller; Broker Fees: Typically 6% Attorney Fees: Approximately $5000
NYC Transfer Tax: 1.425% of purchase price up to $500,000 & 2.625% of entire price
NY State Transfer Tax: 0.4% of entire purchase price For Purchaser; Attorney Fee: Approximately $5000
Application/Credit/Appraisal/Bank Attorney and Other Fees: $5000-$10,000 Mortgage Tax: 2.75% of entire amount on loans over $500,000
Real Estate Tax: A minimum of 6 months of taxes to be placed in an escrow account Fee Title Insurance: Approximately $450 per every $100,000
Mortgage Title Insurance: Approximately $200 per every $100,000
PURCHASE PROCEDURES:
The following information provides a breakdown of the steps in purchasing a home; from the mortgage approval process to the closing.
• Step 1:
Become pre-approved for a mortgage, this can take up to 45 days. • Step 2:
Find a home and make an offer through your broker. This is done both orally and in writing. It is not uncommon for the seller to present a counter offer. Your broker will help you through the negotiating process, after-which, both parties involved will then agree upon the final purchase price and terms.
• Step 3:
Retain the services of a real estate attorney, preferably one familiar with NYC real estate. The attorney reviews information about the condition and legal status of the building, and works with the seller’s attorney to complete the transaction.
• Step 4:
You are ready to go to contract. The buyer is required to submit a down payment, typically at least 10% of the purchase price, to be placed in an escrow account by the seller’s attorney. • Step 5:
At this time, you need to secure the mortgage directly from the bank or a qualified mortgage broker.
• Step 6:
You will need to complete the application package provided by your broker.
These application packages vary by building, however, you should be prepared to provide the following information;
- A financial statement prepared by your CPA which includes assets, liabilities, salary, and bonus information.
- 2 years of tax returns
- You must provide personal, professional and financial letters of reference. - A copy of the mortgage approval letter.
• Step 7:
agent to a Board of Directors, which will then be evaluated for approval. This process can take anywhere from 2 weeks to a month.
• Step 8:
Once all parties have been approved, one of the attorney’s will schedule the closing. A closing is the meeting in which all documents pertaining to the sale/purchase of a particular property are reviewed and signed. Funds are then provided by the buyer to the seller in the form of a bank or certified check covering the down payment and closing costs. Ownership and Title of the property are then transferred from the buyer to the seller.
CLOSING COST DEFINITIONS: • Additional Fees:
These can vary. Ask your broker to explain them to you before the closing. • Appraisal Fee:
A one time fee paid to a qualified appraiser, who then provides a written analysis of the estimated value of the property.
• Attorney Fee:
A pre-determined amount owed to the attorney representing you in the real estate transaction. These fees can vary.
• Condo/Co-op Board Application Fee:
Fees charged for processing the application paperwork which vary by building. These can run anywhere from $350-$900. Check with your broker.
• Flip Tax:
This is not really a tax, it is a fee used by buildings to raise revenue. This amount may be a percentage of the gross net sale, a percentage of the profit made from the sale, or a pre-determined fixed amount. Again, this varies by building, check with your broker. • Credit Report:
This fee can range from $25-$100 per report. • Homeowner’s Insurance:
Provides protection to the homeowner against various hazards. Contact your insurance agent for pricing.
• Mortgage Insurance:
Required with loans made from a down payment of less than 20%, used to protect the lender if the borrower defaults on payments.
• Transfer Fees:
Used to cover the costs of transferring the ownership of property title in official county records.
• Title Search and Title Insurance Fees:
A title search fee is charged for accessing public records verifying that the seller is the recognized owner of the real estate, and that there are no unsettled liens or other claims against the property.
• Down Payment:
The amount of cash put forward by the buyer toward the purchase price of a particular property. This is usually a minimum of 10% of the total purchase price.
• Contract of Sale:
A signed contract between a purchaser and seller of real property to transfer a title of
ownership after specific terms and conditions have been met, and payments have been made.
FREQUENTLY ASKED QUESTIONS: • Why should I buy instead of renting?
If you rent an apartment, you are paying out money every month with no financial return at the end of the year. If you decide to buy, you can deduct the amount of your mortgage loan interest from your federal income taxes, and possibly from your state taxes.
You can also deduct the amount of property taxes you pay as a homeowner. This means great savings at the end of the year. Ask your broker to prepare a purchase cost analysis, which breaks down your monthly cost, estimated tax deductions and sicounts.
• Why should I use a real estate broker to find an apartment?
Buying a home can be overwhelming. A good real estate broker can help guide you through the process from beginning to end. You don’t have to pay the broker anything for their services as payment comes from the seller.
• Why should I use a broker to sell my apartment?
Statistically speaking, brokers usually sell at 10% above owners, due to more advertising exposure, easy access to prospective buyers, and better knowledge of the NYC market. • How do I decide where I want to live?
As you begin your search for a new home, you must decide what factors are more important as this will determine where you can find the type of home that meets your needs and fits your budget. For example, are you looking to live near work, or near to public transportation? Do you want a quiet residential neighborhood, or the trendy section of town near restaurants and nightlife. Speak with your broker about the current state of the market, they will help you determine what areas of the city are right for you based on your current needs.
• When can I plan on moving?
• What is the difference between pre-qualified and pre-approved for a loan?
If you are pre-qualified for a loan, this means that you potentially could get a loan for the amount stated to you, based on the information you provided.
If you are pre-approved for a loan, you have already undergone an extensive financial background check, including your credit history, previous tax returns and employment verification. The lender is willing to give you a loan based on this information and has provided you a letter valid for 60 days stating you are pre-approved for a loan at a specific amount.
• What will my mortgage cover? Most loans have four parts:
Principal: the repayment of the amount borrowed Interest: payment to the lender for the money borrowed
Homeowner’s Insurance: the monthly amount to insure the property against loss from fire,
smoke, theft and other hazards.
Property Taxes: the annual city/county taxes assessed on your property, divided by the
number of mortgage payments you make in a year. • Why do I need a real estate attorney?
It is in your best interest to find an attorney who specializes in Co-op and Condo. This will expedite the entire process as they will be familiar with the nuances of co-op and condo board applications.
• What is equity?
Equity is the financial interest or cash value of your home, minus the current loan balance. • What does FSBO mean?
This term means For Sale By Owner. These owners are not currently using a broker to help sell their home.
