Buyer’s Guide

 

STANDARD REQUIREMENTS

The Budget: Location, size, amenities, building type, school locations, and nearness to public transportation are crucial to determining what a property will cost. We suggest that buyers review financing options to determine what amount of money they can put toward a deposit and then determine what they can afford for a monthly mortgage payment. Some people may want to see if they prequalify for mortgage status to know what budget they will be working within.

Type of Property: Determining what type of property you would like to buy is an important step in the process of finding the perfect home in New York City. Whether it is a co-op, condominium, or commercial property, each property type will differ in process. Be sure to work with an InRealEstate agent who can guide you through the process of buying any of these homes.

Apartments: When purchasing an apartment, there is no approval process, besides normal financial inquiries. Buyers have complete freedom with any renovations they wish to make. Maintenance costs are the sole responsibility of an owner and with this, the owner gets total control over maintenance and repairs. Transferring deeds or reselling an apartment does not require approval.

 

Condominiums: When buying a condominium, buyers also own a percentage of the common building areas, i.e., entrance areas, hallways, recreational areas, etc. The condominium is considered real property. This means owners have the right to use the property any way they see fit. Owners are subject to pay property taxes which can either be escrowed into a part of a monthly mortgage payment or are paid annually as an expense. Monthly maintenance fees are generally paid to the building’s condominium association.

 

Co-operatives: Buying a co-op is tricky but working with a InRealEstate agent can help. When purchasing a co-op, the purchaser is purchasing shares in a cooperation. The shares correspond to the units in which you live. You also must pay coop fees which include a monthly mortgage payment, as well as maintenance fees for the building. Maintenance fees are sometimes high but both mortgage payments and maintenance fees generally result in higher tax deductibles.

 

Estimated Fees:

Cooperative Apartment:
Broker’s Fee: Typically, 6%
Buyer’s Attorney: $1700+
Credit Report Fee: $50 – $100/applicant
Lead-Based Paint Disclosure Fee: 0 – $50
Move-In Deposit: $500 – $1,000 (usually refundable if no damage)
Mansion Tax: 1% of the entire purchase price where the price is $1,000,000 or more.

MORTGAGE CLOSING COSTS

NYC Mortgage Tax: 
If mortgage < $500,000: 1.80% 
If mortgage > $500,000+ on 1-3 family residential dwelling: 1.925% 
Mortgage on all other property over $500,000: 2.80%
Bank Fees: $350-$750
Application Fee: $350
Processing Fee: $330
Appraisal Fee: $300-$1,500 (depending on sales price)
Bank Attorney: $650
Lien Search: $250-$350
UCC-1 Filing: $100
Recognition Agreement Fee: $200+

 

ADDITIONAL REAL ESTATE EXPENSES 

Miscellaneous Co-op Charges: Vary by building 
Maintenance Adjustment: Pro-rated for the month of closing 
Short Term Interest: Equal to interest for the balance of the month in which you close

 

Condominium/Townhouse:

Buyer’s Attorney: $1700+
Application Fee: $350
Processing Fee: $330
Credit Report Fee: $50-$100/applicant
Lead Paint Based Disclosure Fee: $0-$50
Move-in Deposit: $500-$1,000 (usually refundable if no damage)
Mansion Tax (if prices are over $1 million): 1% of the purchase price
Real Estate Tax Escrow: 2 to 6 months
Recording Fees: $250-$750
Municipal Search: $350-$500
Fee Title Insurance: approximately 0.5% of the purchase price

MORTGAGE ASSOCIATED FEES (If Applicable)
Origination, Points: 0-3% of the loan
Application, Credit Check: $500+
Appraisal Fee: $300-$1,500 (depending on sales price)
Bank Fee: $750
Bank Attorney: $650
Mortgage Tax: 0.8%
Mortgage Title Insurance: Approx. $130 per $100,000
Of Mortgage amount NYC Mortgage Tax:
If mortgage <$500,000: 1.80%
If Mortgage >$500,000+ on 1-3 family residential dwelling: 1.925%
Mortgage on all other property over $500,000.00: 2.80%

 

ADDITIONAL REAL ESTATE EXPENSES
Common Charge Adjustment: Pro-rated for the month of closing
Real Estate Tax Adjustment: Pro-rated depending on when the tax is collected
Miscellaneous Condominium Charges: Vary by building

Short Term Interest: Equal to interest for the balance of the month in which you close

NEW DEVELOPMENT DIRECT PURCHASES FROM SPONSOR
For new development condominiums, the purchaser generally pays the NY and NYC 
Transfer Taxes are normally paid by the Seller.

 

GENERAL CLOSING PROCEDURES

What is a closing?

 

A closing is when a buyer gives a seller money in exchange for ownership and title to a particular property. This bargained for exchange, or consideration transfers ownership and title of the property. The seller also needs to sign over other documents including a deed. The place of closing is normally at the bank attorney’s office. The parties present will be the seller, bank attorney, real estate brokers, seller’s attorney, buyer’s attorney, and title closer.
Buyers need to apply for a mortgage as soon as the contract is signed by both parties. 

 

The mortgage process takes up to 45 days and can involve several procedures:

The mortgage broker compiles the buyer’s financial information and then presents the
loan application.

The bank sends an appraiser to assess the property.

The underwriters review the loan and issue a commitment letter.

 

If buying an apartment, coop, condo, or any other property with a board or association, prepare your application package with your InRealEstate. These packages tend to vary from building to building. Most boards use the same financial requirements as the bank. Keep an extra copy of your mortgage application and any related documentation. Buyers are required to get personal, professional, and financial letters of reference. If renting, get a letter of reference from your current landlord. Ask what information is needed and for copies of sample reference letters. The board package is important, therefore, answer all questions in a clear, concise manner and give an accurate description of your financial qualifications. Before submitting your application package, write a cover letter, organize the presentation, and review it with your InRealEstate broker.

 

The board package is submitted after a buyer receives his/her mortgage-loan commitment letter. It is then submitted to a building’s Managing Agent. The Managing Agent checks the application, evaluates credit, and references, and then submits the package to the board. The board then reviews the completed package. Additional information may be requested or if 
the package is passed, and an interview is scheduled. There is either an interview committee that approves new applicants or a board will do it during its monthly meetings. Your InRealEstate can assist you with the date, time, and any other preparations for your interview.

Closing is scheduled after the board approves an application package and completes the interview process. This generally takes 2 weeks for final approval and can vary depending on the availability of the parties involved, i.e., managing agent, buyer, seller, lawyers, and banks

 

General Closing Costs Defined:

 

Additional Fees: Sometimes borrowers are required to pay additional fees. Some of these include Wire Fees, Tax services, Survey Costs, Flood Certification, Settlement Charges, Messenger Fees, Sub-Escrow Fees, and Transfer Tax. Ask your broker to explain these fees.

 

Appraisal Fee: Fee charged which estimates whether a property is worth enough to support a loan. A qualified appraiser will look over the property and produce a report.

 

Attorney Fee: Fees paid to attorney representing you in real estate purchase (some closes require you to pay bank attorney fees or with condos, sponsor fees for sponsor attorney may be required. Fees vary according to the type of property and $ the value of the property.

Condo Board Application or Co-op flip tax: Fees charged for processing condo applications or coop shares.

 

Credit Report: Generally, cost between $25-$100 per report.

Document Preparation Fee: fee charged by bank or mortgage company for preparation of paperwork.

 

Escrow: (Taxes, Insurance) – In this case money figured into a mortgage for certain conditions like taxes and insurance, etc. (see real estate terms defined for a more complete definition).

 

Inspection Fee: fee for inspection of the property to make sure it is up to code and livable.

Homeowner’s Insurance: Is required to protect against property damage from hazards, i.e. fires, floods, etc.

 

Mortgage Insurance: Usually loans made from a down payment of less than 20% require mortgage insurance. This protects a lender if a borrower defaults on home loans.

 

Origination Fee/Points: Depending on the type of a loan and the rate a mortgage seeker chooses, he/she may pay points. 1-point equals 1% of the total loan amount.

 

Prepaid Interest: This amount pays the interest due from the date of funding to the end of the current month.

 

Recording/Transfer Fees: This covers the costs of changing the property title in official county records.

 

Title Insurance and Search: Fees that are charged for a title search and insurance fees. A title search is used to verify that the seller is the true owner of the property being sold and that 
the seller has the right to sell it. Title insurance protects a lender in the event of a lien or other problems with the title for the property in question, that was not disclosed at the time of sale.

Time Until Closing: Generally, sales take between 3-5 months to close depending on various factors. The most common factors affecting closing include mortgage & financing, condo/coop board approval, and negotiation.

 

Recommended Amount to Put Down: The amount needed to purchase property varies according to the type, size, and location of a property. For example, is the property a single or two-family dwelling, coop, or condo. At InRealEstate, we recommend being prepared to pay about 10-20% of the total price. Some properties may accept a smaller percentage for qualification. You will also need to set aside additional monies for closing costs.

A contract of sale is a legally binding agreement between a purchaser and a seller in which each party gives consideration, (bargains for an exchange) to define the terms of the sale.

 

Frequently asked Questions

 

What do I need to facilitate the buying process, so I do not miss out on a great deal?

The New York City real estate market is extremely competitive. The most desirable and affordable properties can go to contract in a matter of days. The most important factors in getting a deal to closing include the following:

Annual Income – Generally you can borrow up to about 2xs gross annual income. Monthly mortgage and maintenance payments should not exceed 1 week's gross salary. If you have significant liquid assets, you may be able to borrow more.

Financial Statements – should be prepared by an accountant. It should list net worth including assets, liabilities, salary, bonus, etc. InRealEstate submits offers with financial validation. The most qualified buyers are usually the ones whose offers are accepted. Having a complete financial statement is very important when there is an apartment or a property with multiple bids.

Asset Valuation – A down payment alone does not qualify a buyer for a coop or a condo in Manhattan. Usually, a coop board or condo association wants guarantees for mandatory maintenance fees. They want assurances against unexpected loss of income.  Many coops require liquid assets totaling 1 year’s worth of maintenance and mortgage payments after closing. Also, some buildings require liquidity up to three years of combined costs. Ask your InRealEstate agent to assist you with specific requirements.

 

What is the importance of a credit check and how does it fit into the buying process?

A credit check is generally performed by a mortgage broker and pertains to your credit history. Resolve disputed claims and have them removed immediately from your credit report. Keep all pertinent documentation that illustrates that the issue is resolved. Also, we recommend buyers choose a mortgage broker because mortgage brokers can save time and money. We work with various brokers throughout the New York Area, if you are interested ask your InRealEstate agent for more information.

 

What does be pre-qualified mean?

Pre-qualified, also called pre-approved, is when a prospective buyer tells a lender income level, debt, and credit information, so the lender can provide an estimated loan amount, based on these criteria. Being a pre-qualified buyer will reassure a seller that any offers made are bona fide and that a buyer can make the purchase. In fact, most offers submitted by InRealEstate are often accompanied by a buyer’s pre-qualification letter; this letter notifies sellers that financing is an option. Ask your InRealEstate agent to provide you with information about financing, estimated monthly mortgage payments, and any other necessary qualifications. Pre-approval letters make for strong offers because the lender has already pulled a credit report, checked debt/to/income ratio, and done an analysis of your finances. Also, it is preferable to be pre-approved so that there will be no surprises when the credit report is received.

 

Why select a real estate attorney?

The real estate market in New York City is a very dynamic market. Having a real estate attorney who specializes and has experience in New York City real estate is very important. They not only know the intricacies of the laws and regulations, but they can respond quickly to any problems that arise, which helps to expedite the closing. Ask your InRealEstate agent to assist you in selecting a qualified real estate attorney to help you through this process.

 

What are the steps in the application process?

For mortgage applications and for coop or condo boards, buyers need to gather relevant financial documentation. Required documentation includes 2 months of most recent bank statements, brokerage statements, and any other assets. In addition to current income verification, boards and banks require a minimum of 2 years of federal income tax returns. Self-employed buyers need to provide at least 3 years of federal tax returns and a letter from an accountant verifying income.

 

When do I need to move?

Find a target date for moving. If looking to finance, expect to take about 3 months from purchase to close. Buyers, begin your search 4-6 months prior to an estimated moving date.

 

Where do I want to live?

New York City is a city of diverse neighborhoods, all with their own unique appeal. Before beginning your search, decide what is important. For example, proximity to public transportation or proximity to your job. Are your preferences for a quiet residential neighborhood or a bustling hub of activity and nightlife? Try to be open to different areas as sometimes neighborhoods other than your first choice are more affordable and offer many of the same features. Visit our detailed neighborhood guide for information on all our neighborhoods. InRealEstate agents are familiar with neighborhoods across New York City and can help you find one that best suits your needs.

 

What is the best way to win over sellers?

If you really want to buy a particular home that seems to have a lot of interest, make sure the seller knows you are a qualified buyer. It doesn’t matter whether you plan to buy a studio or a building, chances are that there is a limited number of properties available in your price range. In a competitive market, high-interest properties can be in contract before they even appear in the classified ads.

Brokers tend to notify serious buyers first. This is when being extremely prepared becomes important. Make sure that you have all your paperwork ready and in order, including financial documentation and pre-qualification for a mortgage. Communicate your needs, budget, timetable, and neighborhood preferences.

Make yourself available to view properties. By being flexible with viewing properties during the workweek, you can avoid weekend shoppers, and congested open houses. Further, a lot of prime properties tend to show properties between 10-3, M-F.

 

How do I make the deal happen?

After finding the property you want, immediately make a verbal offer. Your InRealEstate agent will help you decide the best way to extend an offer to a seller. There are a lot of different reasons, other than money, that influence a seller in choosing the right buyer. If the verbal offer is accepted, have your broker get confirmation of the offer and acceptance in writing. Once the written offer is accepted and signed, your InRealEstate agents will prepare a transaction summary. This is sent to the seller’s and to the buyer’s attorneys for review. Using the signed offer and acceptance, the seller’s attorney then prepares a contract of sale. After the buyer’s attorney reviews the contract, negotiates terms, and evaluates the property’s financial statements, the buyer then signs the contract and presents the down-payment check. Generally, down payments range from 10% – to 20% of the contract of sale. This money is often held in the selling attorney’s escrow account to be sent to the seller’s attorney. The seller then executes the contract.

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