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Manhattan Buyer's Guide
First step would be to discuss one-on-one your specific needs, goals and timeline.
I then look at your individual needs and goals and work with you to formulate plans tailored to meet those objectives, within that time frame that works best for you.
The following information is intended to provide you with an introduction to the unique purchasing process in Manhattan.
Before beginning, it is important to outline the different forms of ownership available to purchasers of Manhattan property. Those forms are Cooperative, Condominium, Cond-op, and Townhouse (both single and multi-family). Please see the notes at the end of this document for a full description of each form of ownership.
It is important to know your needs and goals ahead of time and know that thattt ththtatthatthe building you chose meets them...
We will work together to complete the following:
Speak with a Mortgage Lender/Broker and obtain written pre-approval for a loan. This helps you determine your purchasing power and enables you to act expeditiously and with confidence when you identify the property you would like to purchase. Additionally, a pre-approval assures the seller that you are qualified, providing you with an advantage when bidding on a home. This is especially helpful in a multiple interest situation.
Choose a Manhattan Attorney who specializes in residential Real Estate. As New York City has complex real estate laws, attorneys are utilized to close all real estate transactions. Time is often critical; be sure your attorney is available to move quickly.
The customary deposit upon executing a contract of sale is 10% of the purchase price. Ideally, be prepared to have those funds liquid when you begin your search. The balance of the down payment will be due upon closing.
For Coop purchases, your total annual housing costs should not exceed 25-30% of your gross reported income, and your total debt should not exceed 35-40% (except in the case of substantial liquid assets). Housing costs include: mortgage interest, coop maintenance, secondary residences and any other mortgage in which your name appears.
In certain forms of ownership, offers are not only accepted based upon price, but upon the financial strength of the potential buyer. Therefore, be prepared to have your net worth statement with substantiating documentation (bank statements, brokerage statements & other financial documentation) available. In many cases sellers require you to provide this with your offer. Regardless of the outcome this information will be required for most purchases and financial institutions so having it prepared will also save you time in the future. Be assured your agent will safeguard this information in a confidential manner.
Review your credit report. Remove all disputed claims and clear up any debt if possible, especially outstanding credit card balances.
Guidelines to finding your home:
Define your search parameters. This typically includes price range, location, size, type of ownership and building amenities (if appropriate). Ultimately, flexibility will only work to your advantage.
Choose an agent to work with. Since agencies have almost all the same listings, working with one broker allows you to efficiently schedule appointments to see only those properties that meet your needs. In addition, working with more than one broker may actually prolong your search by having the same properties shown to you by multiple brokers or by having multiple brokers confuse other brokers by making appointments at different times for the same customer. Since property in Manhattan tends to sell rather quickly, prolonging the process may actually hinder you from seeing the property that best meets your needs. Lastly, by creating a good relationship with your broker, you assure that you are the first person they call when a new listing arrives on the market.
Talk to your broker. Be specific about your needs, price point, locations of interest and any other amenities you require in your new home or building. If you do not feel comfortable with your broker, do not hesitate to let them know so that they may have the opportunity to refer you to a colleague with whom you may be more compatible.
When scheduling appointments, try to be available during the week. In addition to evenings, early morning and late afternoon is a good time to schedule appointments, as more brokers are available during these times to provide access to their listings. In addition, by avoiding weekend and open house showings you allow yourself to view properties without fighting crowds of people (competition) and giving you more time to ask questions and get a "feel" for the property.
Once you identify the property - The purchase:
Submit a verbal offer through your Agent immediately who will then follow it up in writing. The offer will include such provisions as purchase price, down payment, amount of financing, included and/or excluded personal property (i.e. window treatments, lighting fixtures, etc) preferred closing date, current income (combined for couples), job description, net worth, and debt status (loans, credit, etc.). Once your offer is verbally "accepted" by the seller, your broker will notify the seller's attorney who in turn will draw up and send to your attorney the initial contract.
Keep in mind that sellers are allowed to hear ALL subsequent offers while your contract is negotiated (or finalized). In fact a seller may accept another purchaser's offer up to the point of a fully signed, executed and returned contract. This means that until your contract is signed by both you and the seller, your deal may not sustain as the primary deal. Therefore, instruct your attorney to proceed expeditiously.
Your attorney will review with you the contract, perform a "due diligence" reviewing with you the "financials" and/or "issues" of the building, and ask you to execute the contract and put forward a 10% deposit to be held in escrow until closing. Thereafter, the seller signs the contract and your attorney will deliver one original to you and one to your mortgage broker/bank.
Immediately apply for a mortgage (if applicable). Your agent will work with your mortgage broker/bank to coordinate the appraisal of the property and provide the bank with requested information on the building. The loan process typically involves several steps from application to appraisal and finally approval. This process may take up to 45 days to complete and hinges on your ability to provide all of the required financial data to your broker/banker in a timely manner.
While awaiting your mortgage commitment work with your broker to complete your board package (not applicable for townhouse purchases). Your broker will provide an application which varies from building to building which typically must be completed and returned to your broker (who will in turn deliver it to the appropriate party) within 10 days of receipt of the fully executed contract or 3 days for the date a bank commitment letter is received, whichever applies. A typical cooperative board package requires at the minimum, the following: Personal and Business Reference Letters (if necessary, we can provide you with sample reference letters to assist your friends and colleagues), Employment Verification Letters and/or Pay Stubs, Bank Verification and Brokerage Statements, Net Worth Statement (this mirrors the information requested by your bank), two-years tax returns and the mortgage loan application and commitment.
Board packages must not be taken for granted. All questions and requests for documentation must be complied with. Both the application form and the Net Worth Statement should be typed and the package should provide a clear and concise assessment of your qualifications to purchase.
Once completed, your broker will review the package in order to assure that all the required documentation has been supplied and presented in the manner requested by the board and then forward the package to the buildings managing agent or otherwise authorized personnel for processing.
Upon review of your board package, the board will typically schedule an interview to meet with you. Boards vary in the manner in which they meet with applicants so please check with your broker to find out how often the board meets or if they have a separate interview committee that meets on a case by case basis.
After the interview, typical notification of the board's decision is given to you or your Agent within 72 hours however some boards reserve the right to take longer.
Upon board approval, notify your attorney who in turn will coordinate the closing date. A typical closing can take up to 2 weeks to schedule so please keep this in mind when planning your move.
Prior to closing - The Inspection:
The day before or the morning of the closing (but usually after the seller has vacated), your Agent will accompany you on an appointment to inspect that the property is in the same condition or promised condition as stated in the contract. Be sure to check appliances and the removal of personal property, and that the premises are broom clean.
At any closing be sure to bring with you your driver's license or passport, your checkbook for any last minute adjustments, and all certified checks discussed with your attorney.
Cooperatives and Condops: The closing is ordinarily held at the office of the management company for the building. The closing is attended by you, your attorney, the seller, the seller's attorney, the lender's attorney, a representative from the managements transfer dept., and the Agent(s) involved in the transaction. At the closing you will first sign documents necessary to complete the loan transaction inclusive of a Security Agreement, Promissory Note, Stock Power, and an Assignment of Lease. Thereafter, you will sign all documents to convey the apartment and secure interest in the apartment such as Stock Certificate, Proprietary Lease and Consent and Checks representing the balance of the purchase price and adjustments are exchanged for the keys to the apartment.
Condominiums & Townhouses: The closing is ordinarily held at the office of the seller or lender's attorney. The closing is attended by you, your attorney, the seller, the seller's attorney, the lender's attorney, the title company closer and the Real Estate agent(s) involved in the transaction. At the closing you will first sign all documents necessary to complete the loan transaction inclusive of a mortgage and promissory note. Thereafter, you will sign all documents to convey the condo apartment to you including a Deed, Title Report, and Unit Power of Attorney. Checks representing the balance of the purchase price and adjustments are exchanged for the keys to the apartment or house.
Notes - Definitions of different forms of ownership
Manhattan residential real estate is comprised of approximately 15% Condos and Townhouses, 85% Coops and Condops.
Manhattan Properties > Townhouses (or Brownstones)
Quintessential to NYC and seen in many movies and films of Manhattan, townhouses and brownstones bring back an era of beauty and mystique and of skilled craftsmanship not easily found today. There are many townhouses and brownstones throughout New York City neighborhoods. Buying a townhouse or brownstone is similar to buying a free-standing building or house. The owner receives “fee simple” ownership in the property and is the sole party responsible for paying all of the property taxes and maintenance costs. Essentially if you like it, you buy it, no questions asked.
Brownstones most commonly will have a street entrance to the ground floor referred to by some as an English basement which is half a story below street level but is still ground level with a private garden at the back of the home. The first floor referred to by some as the parlor floor can be accessed from the street via the very grand signature staircase with brown stone railing or sometimes wrought iron railings to what serves as the front door of the house. You can also easily access the home from inside the ground floor or English basement. As in all townhouses, brownstones often offer high ceilings and beautiful wood work with plenty of unique, turn of the century charm and details.
The term "brownstone" refers to the brown signature sandstone quarried in the Connecticut River Valley and on the shores of the Hackensack River from the Portland Brownstone Quarries which were a set of historic quarries in Portland, Connecticut that were popularized back in the 19th century in townhouse construction. Since brownstone was a soft stone, it was easy to work with, which enabled the stone masons of the time to add the signature design elements we see today with relative ease and low cost. The actual brownstone gives that look and feel of many townhouses in New York today that is very sought after.
Manhattan Properties > Condominiums (Condos)
A condominium is real property, best described like owning a home where you own the physical floors, walls, etc. The owner of a condo holds title by deed of the apartment and a percentage of the building’s common areas. Owning a condominium can be much more flexible than owning a coop, as condos could be far less restrictive and far less invasive to the buyer than coops.
Generally, but not always, condos allow subleases with far fewer restrictions, as well as foreign and corporate ownership and easier financing criteria. Condo owners pay property taxes to the city and common charges to the condominium.
Traditional financing can be obtained for condominium purchases with only a 10% down payment in most cases for U.S. residents, but that varies, and goes higher depending on lending institutions and borrower and a higher % down payment for foreign nationals (non-U.S. citizens). The fewer restrictions, low down payment requirements, easy access to financing, and less inspection into the buyer's finances, work history and personal life, does increase the marketability and salebility of condos and townhouses.
Due to the physically lower number of condominiums to coops and condops which are approximately 15% of the available inventory, there is a higher demand for fewer property, and due to the higher degree of marketability, less inspection into the buyer's personal history and finances by the boards, Condos are generally more expensive than coops. Despite the higher purchase price the ease and convenience in buying and selling condos makes them a very attractive investment as a home or investment vehicle for personal, foreign and corporate purchasers.
Manhattan Properties > Cooperatives (Coops)
Potential owners (and tenants, if allowed by that building) must be interviewed by the coop board and present formal applications and required documentation in order to be approved by that board. The process of closing takes approximately 60 to 90 days. While condos require only an application, buyers and renters are not interviewed.
It’s important to note coops are and can be an excellent choice for a buyer and their specific needs and a great means to save money. To increase the probability to get board approval and be allowed to buy the apartment, it is highly important for the buyer to match their goals, criteria and financial means with the coop buildings that fit their needs. Coops vary from building to building.
Cooperatives (or Coop) are buildings which are owned by a corporation and that corporation sells shares of stock in that specific corporation which the buyers then become a shareholder in and in turn sign a long-term proprietary lease for the unit they are living in.
The proprietary lease allows a shareholder to live in that specific apartment for that coop building. The larger the apartment, the higher the floor, the better the views etc, the more the number of shares will be given to that unit. The shareholder will pay their share of maintenance costs based on that amount of shares given to that unit. The more the shares, the higher the maintenance.
Maintenance charges are paid to the corporation typically through the managing agent for the coop and include all of the building expenses, including property taxes and mortgage interest if the corporation holds a mortgage on the building.
Coops make up rules and bylaws they feel are in the best interest of that coop (building) and the shareholders are required to adhere to those rules. The larger number of coops in Manhattan require shareholders to occupy their apartments as their primary residence, so the buyer cannot buy it as a vacation home that may be their second or third home, etc. Only the shareholder may be allowed to use and occupy the apartment as well, so any other person staying in the apartment would not be allowed without board approval first. Most coops also have rules sharply limiting or prohibiting subleases, therefore investors and non-U.S. citizens should not be looking at coops as a viable investment. Knowing your goals and objectives and matching them to the right buildings so you can get board approval plus be happy owning and using the apartment is everything!
Financing requirements of a coop varies from coop to coop. The coop sets the maximum loan amount for that building which can be financed. More liberal coops are typically 25% down and then move up to 50% and 75% or even 100% down payment of the value of the property. The percentage down depends on the building.
Although coops all vary, there are a few exceptions, but among the majority of coops these common coop rules apply: no corporate ownership, no foreign ownership, and no renting or subleasing upon the first day of ownership. So know your goals and know ahead of time the building you chose meets them.
Manhattan Properties > Condops (a merger of Coops and Condos)
A condop is explained by some in the real estate industry as essentially a coop with condominium rules, usually allowing subleases and foreign buyers. However, that is incorrect and not the case. A true condop is defined as a condominium that has separate commercial and residential units. The residential units are controlled by a corporation, hence, a coop. The developer at the time spun off the commercial space into a separate entity from the residential and either sold it off or kept it for its income producing elements such as retail space, parking garage or even possibly office space. Since the residential element is owned by the corporations, hence a coop, they can be restrictive or easy and operate as a condo, so from building to building this varies. Some of the most restrictive buildings in NYC are condops while others are easy operating as condos, so know your goals and know ahead of time that the building you chose meets them.