NYC Apartment Buyer Guide
What you will get out of this guide
What’s remarkable about the advent of Trulia, Zillow, Craigslist, Streeteasy, and all other online platforms that showcase apartments in NYC, is not the quick access to information but rather the volume of options.
I believe in the mantra that less is more. With so many platforms to choose from, you are actually given too many choices to examine. Instead of getting quick and easy access to various pieces of information that a new or seasoned buyer wants, you may find yourself feeling overwhelmed.
The data, the listings, the websites – it is all so voluminous. Garry Keller and Jay Papasan authored a book titled “The One Thing”. What this book talks about is removing all distractions and focusing on one specific task. This is exactly how you need to approach the buying process and this is the precise reason why we wrote The New York City Apartment Buyer Guide. Our goal is to make your home purchasing journey easier and to do that, we will educate you on every major piece of information you need to be aware such us:
- The typical steps to purchasing an apartment
- The difference between a condominium and co-op apartment
- Where to start your apartment search
- Working with a broker
- The best time to buy an apartment in New York
- The pre-financing stage
- Making an initial offer
- What to expect during negotiations
- Getting to closing
After you go through this guide, the entire process will be crystal-clear to you. You will know more about financing, tips for negotiating on the price, and many other key points that agents and brokers prefer to keep to themselves.
Whether you decide to go with a broker or find an apartment on Zillow independently is your call – our task here is to simply break-down the process for you. To start, let’s go over a basic outline of the most common steps you will go through when purchasing an apartment in New York City.
Common Steps To An Apartment Purchase
9 Steps To Expect
The entire purchasing process can be summarized into 9 steps. You might find yourself in a precarious situation with a unique set of circumstances, but for most buyers, the following key points are what you can expect:
→ Find a lender and see how much you can get pre-qualified for. Once you know your financial parameters, find a home that fits your budget. Use one of the major realty websites to find an apartment or hire a buyer’s broker so they can show you what is listed on the MLS (Multiple Listing Service) and other exclusive sources not available online.
→ Once you find the right apartment, make an offer. The seller’s agent will let the property owner know about your bidding price. Once everyone agrees to a price, the seller’s attorney will send your attorney a contract of sale.
→ Hire a real estate closing attorney to review the contract of sale. There may be various contingencies in the contract which a lawyer would be able to identify and explain.
→ Once the contract is executed, the down payment, which is typically 10% of the selling price will need to be deposited. This check will be mailed to the seller’s attorney. It will then be placed into an escrow amount. Although 10% is the standard norm, a seller is free to accept a lower amount, such as 5%. We have seen contracts executed and properties sold with only 3% down.
→ Now begins the financing part – find a mortgage banker or broker and submit all of the necessary documentation. Also, complete the mortgage application. This process is time consuming and it can take several weeks to attain a loan commitment.
→ If the property you are trying to purchase is a co-op, the seller’s agent should provide with the board package as soon as the contract of sale is fully executed. Get started on the board package immediately as most co-ops require recommendation and employment letters, tax returns, pay stubs, proof of funds, landlord letters, etc. Once the contract is signed and tendered to your lender, the bank will schedule an appraisal of the property.
→ Upon the issuance of a commitment letter from the bank, submit your board application to the building’s management company. If your package is complete and no other information is needed, the management will contact you with a date to meet with the board. Depending on the management, it can sometimes take several weeks to get a date. Don’t get discouraged or paranoid. Make sure to follow up with the the handling managing agent on a weekly basis by email or phone.
→ After your board meeting, you will receive notice (typically by email) on whether or not your application has been accepted. Assuming you are approved, the attorneys to the parties will now coordinate a closing date.
→ Expect to spend at least 1 hour at closing as many documents will need to be signed. If you are buying a co-op, you will receive a proprietary lease and shares in a corporation. If you are buying a condo or a house, you will be given a deed.
→ This entire process can take 60 to 90 days assuming your scenario is unremarkable. If you are an all cash buyer, everything moves much faster since there is no bank involvement and no appraisal will be needed. There may be some delays with title clearance if the property has violations or the seller is an estate.
Now that we have an overview of what the entire process entails, let’s get into specifics. Before you make a decision on the neighborhood you want to live in, you first have to figure out if you want a co-op or a condo.
Co-op vs. Condo
If you have decided on an apartment as opposed to a house, the two forms of options are: condo and co-op’s. Both are very different with their own unique set of advantages and disadvantages.
Approximately 80% of all apartments in New York City are co-ops and the remaining are condos. Because of supply and demand, co-ops tend to be more affordable.
A cooperative is owned by a corporation. As the tenant, you do not own the apartment and a co-op is not considered real property (a term used to describe real estate such as a house or land). You are considered to be a shareholder in a corporation and at closing you don’t receive deed. Instead, you receive a stock certificate that is associated with a proprietary lease.
Advantages of a Co-op
- Co-ops are a great option if you plan to live in the building on a long-term basis and and don’t plan on continuously renting out the unit.
- You like the idea of living in a big building and enjoy a sense of community.
- Closing costs are slightly lower compared to a condominium.
- Co-ops tend to be lower in price compared to condominiums which makes them more attractive to buyers on a tighter budget.
Disadvantages of a Co-op
- Co-ops do come with higher maintenance fees each month.
- You are faced with restrictive rules created by the board which must be followed, such as no pets, restrictions on noise, carpeting, renovations, etc.
- Mortgage financing may be challenging because a bank is not only looking at your individual finances, but the financial health of the cooperative building as well.
- If the building allows subleasing, the prospective tenant must get board approval. The management will run a background check (credit, criminal and landlord history) on the tenant, and review his or her financials. It’s essentially the same process as trying to get board approval for the purchase. Some buildings go as far as charging a monthly percentage fee on the gross rent collected on the unit (as high as 33%).
With a condo, you own the physical unit, unlike a co-op. At closing you are given a deed as opposed to shares in a corporation.
Advantages of a Condo
- You pay substantially lower maintenance/HOA monthly fees.
- Securing mortgage financing is typically easier.
- You can sell or sublease the unit without any restrictions.
Disadvantages of a Condo
- Closing fees are slightly higher compared to co-ops.
- The purchase price of a condo tend to be higher.
- New developments are becoming quite common in New York City, therefore, selling your unit for a reasonable profit will be difficult because most buyers prefer to go with a a newer property at the same price point.
Consider your long-term goals and what your budget dictates. Choose the type of property which aligns better with your personal situation. Once you know what you want it’s time to start your apartment search.
Start Your Apartment Search
Figuring Out Your Apartment Needs
Convenience trumps charm – that is my buying philosophy. A dainty unit in the middle of nowhere may be appealing at first, but if you need almond milk, the last thing you want to do is walk 5+ blocks to the next available store.
With that said, I have compiled a list of questions you should ask yourself to get a better idea of what exactly you need:
- Are school options important?
- What are the nearby transportation options?
- Are houses of worship a requirement?
- How many bedrooms do I need?
- Does this fit my budget?
- Is this a neighborhood I can see myself living in?
- What entertainment options are within the immediate area?
- Do I have pets or do I plan on having pets?
- Is parking a requirement?
- Are there children play groups in the immediate vicinity?
- Are there daycares in or near the building?
These are just a few questions you should be asking yourself. It’s okay to be indecisive. All of us are indecisive until we actually start going through a systemic list of requirements in order to shrink our scope.
The main indicator in your search will definitely be your budget. Prequalifying for a mortgage (which we will address later) will be an important tool. All other questions such as transportation and nearby schools will follow after.
Working With a Real Estate Broker
Why a Buyer’s Agent Can Make All the Difference
Most people are familiar with the concept of using an agent to sell a home. There’s also a very common concept of using a buyer’s agent to buy a home. You are probably thinking buying real estate is already expensive but now to top it off, you’ll need to pay a broker as well? Not necessarily.
A seller’s agent would actually split their commission with a buyer’s agent. That means you as a buyer don’t directly pay your agent.
A buyer’s agent is there to assist you. An agent will accompany you to showings, provide you with comparative sales reports to determine an accurate estimate of a property that is up for sale, handle all negotiations, and be your main advocate trying to get you the best deal possible.
To give you an accurate representation of what it’s like working with a buyer’s agent, here is a chronological summary of what we do as agents and brokers from beginning to end in a real estate transactions:
⇒ During our initial meeting, we would find out about your interests, where you work, who will be living with you, and what your residential needs are. We can also make recommendations for mortgage bankers to determine how much you are prequalified for. Once we get the results, we will access the MLS and provide you with a listing of properties that fit within your budget and stay within your preferred parameters of comfort.
⇒ We then contact owners and their agents to schedule up private viewings. We accompany potential buyers to every private showing and open house viewings. If there aren’t any suitable properties available on the MLS, we will directly contact owners of various buildings that you find attractive and inquire if they would be willing to sell. To put it mildly, we are relentless in finding you a home.
⇒ After the showings, we would compartmentalize all of the units we saw and select the apartments you liked most. We will then run a comparative sales report to see if the units are over or under priced.
⇒ The next step is the offer-making process. Any detail we find that we can use at our advantage during negations, we will certainly implement. For example, say the unit has a small kitchen. We will explain to the seller how we arrived at the offer figure, and emphasize that other comparable units in the area come with significantly larger kitchens. Our job is to convince the seller to accept your offer as fair and representative of the market.
⇒ Once an offer is accepted, we will assist you in finding a dependable real estate closing lawyer if you need a recommendation. A contract of sale will be sent over to your attorney for review and signature. Upon full execution of contract, we provide you with the board package (if co-op) for your completion.
⇒ We will assist you with compiling and finalizing the board package. We will also prepare you for the upcoming board interview. Once you receive your mortgage commitment letter, the board package is forwarded to management. They review the package to determine its completeness and forward it to the board members of the buildings to schedule an interview date.
⇒ Assuming you get approved and we get to the closing date, we will provide you with either a bottle of scotch or wine – that really all depends on what you like more : ) .
In between all of the above, we will be following up on all parties throughout the negotiation, financing, and closing process. You would be surprised how slow some of these parties work unless they actually start getting phone calls from agents and brokers to move things along.
At the end of all of this you need to remember you won’t be paying us any commission. This is on the seller.
When To Buy In New York City
Determine the best time to execute your decision to purchase
There is a great article on this topic which we will summarize here. Spring and fall have the most inventory and biggest discounts compared to all other seasons. In particular, April through June sees the most homes going on the market as well as October.
One of the main reasons we see the most activity then is simple – it’s not cold outside and people are done vacationing. Moving in the middle of a freezing New York City winter is difficult. Closing on average takes 60-90 days. So if you were to make an offer between April through June, you would move in while it is still warm out. The same goes with October since you will be living in your new apartment by December.
In the link above, StreetEasy has two great charts displaying the level of inventory and price cuts that take place in NYC.
Here is what the price cuts look like. May, June, September, and October show the biggest discounts.
Here is the graph for inventory. May and October dominate in their respective seasons.
If you can wait it out, start your apartment search in March or late August right before the market starts to get hot.
On a personal note, when I was looking to buy my first apartment, the only thing on my mind was the fact that I was wasting my money on rent. The level of inventory or discounts were irrelevant to me and I was certainly not trying to time the market.
All I knew was if I had the money to buy, I pulled the trigger and that’s exactly what I did. For those who don’t mind renting, by all means use this information to make the most prudent choice.
If you absolutely hate the fact that your money is helping a landlord get wealthier, make your purchase the moment you know you have enough money in the bank to execute a deal.
Explaining the process
Now comes the moment to know if you are in the financial position to actually own a home. You would need to go a lender and get evaluated on whether or not you qualify for a mortgage. Make sure you get a pre-approval letter because some seller’s want a copy when you make an offer.
You can either go with a mortgage broker or go directly to your local bank to see how much you can qualify for. A pre-approval is a soft promise (not a guarantee) from a bank to provide you with a loan at a specified interest rate without taking into account the appraisal results of the property as well as other requirements that the bank may have in regards to the co-op/condo.
Here is some of the information you should be ready to supply:
- Income verifying documentation such as your W-2, several months worth of pay stubs, & tax returns.
- Retirement and investment account information.
- Passport and valid IDs.
Expect the lender to run at least two credit score checks.
Once you get a pre-approval letter, you may find yourself with a list of requirements that the underwriter wants you to complete. Your actual loan will be contingent on going through these tasks. Some of these requirements could include:
- Paying off a specific credit card or loan.
- Removing your name from a line of credit that you aren’t using.
- Depositing a certain amount of money into your accounts.
- Liquidating an investment account or a stock position to free up more cash.
Once you fulfill these obligations, you will receive a mortgage commitment letter. This letter will specify the exact amount you are qualified to borrow from with a specific interest rate. The interest rate is usually locked for 2 months but the lender can extend it if need be.
Make sure to get a pre-qualification done at a minimum. A pre-qualification is not as strong as a pre-approval but you will get a ball park idea of whether or not you can handle a mortgage.
Making The Offer
Doing it the right way
Now that you are pre-qualified/pre-approved, you are in a position to make an offer on an apartment that you like. Some agents believe that you should never low ball an asking price beyond 10%. I disagree. Zillow can be your best friend at times because they display the price history of an apartment.
FSBOs (For sale by owner) usually have it wrong when they list a property. I say this from a position where I’ve viewed their listings on multiple occasions and conducted a comparative market analysis (CMA) report. There’s an odd epidemic where homeowners think their property is worth hundreds of thousands of dollars above their actual market value.
Take a look at the price history above. On 2/9/18, the owner listed their apartment for $1,249,000. If you follow the 10% rule, the least you would have offered would have been $1,124,100. After 8 months on the market, it seems that this seller is now willing to take an offer of $950,000 which is $174,100 lower than your original offer. My point is don’t follow any specific offering etiquette.
This listing is a great example as to why you should take your time with an offer. Seller’s feel the pressure and anxiety when they aren’t receiving the offers (or any calls for that matter) about their apartment. The desperation builds up. In the case above, you could have made a best and final offer of $940,000 and more than likely have the seller agree to it. This type of price history for a buyer is like blood in water for a shark.
Suppose you found an apartment you love but don’t want to wait 6-8 months for the property to not be sold and then make a truly low offer. It’s not guaranteed this apartment will even stay on the market for that long. The way to make a good offer is to find as many flaws as possible.
- The kitchen may need a renovation.
- Similar apartments on the market are going for a lower price.
- The building doesn’t have a doorman compared to the other residential towers on that block.
- The apartment is near a busy intersection that gets loud.
Convey these issues to the broker/seller when you present them with your offer. They may agree with you about the flaws you indicate and accept your offer as is. Be sure to let them know there are other apartments on the market you will be viewing within the coming week. A live buyer is a seller’s biggest asset. Knowing that you will be viewing other apartments will warrant their haste in accepting your offer.
If there is a bidding war for an apartment, you have to sweeten your deal without breaking the bank. Always present to the seller that you are already pre-qualified. Offer a concession at closing such as paying a portion of their transfer fee tax or provide them with ample time to move out. Some buyers may want to move in immediately but the seller may want a lengthier move out date. By showing the seller you are in no rush to move in, that additional time they get with their apartment may be of more value than the monetary offer another buyer has made.
Making an offer is an art form. Be creative but be reasonable.
Reaching the end
Once you get to a price point both you and the buyer agree too, you will enter into contract. Your attorney will need to get in touch with the seller’s attorney. Typically, 10% of the purchase price will be put into escrow.
Your mortgage banker needs to be contacted so you can begin the mortgage application. The same documentation you gave over during the pre-approval will need to provided once more. While you wait on your commitment letter, start working on the board package. You will be interviewed by the board of directors to see if you will be a good fit in the building. What the board is actually trying to determine is if people can live with you , if you will be a nuisance, and if you will be able to pay your bills on time. Similar documentation that you gave to your mortgage banker will be provided in the board package.
In addition to your financials, you will need to get several letters of recommendation. During the interview remember the following : less is more. Don’t provide more information than needed. They will be asking you many questions so just be brief and precise.
Assuming you get your mortgage and the board approves you, all the remains is the closing date. Several parties will need to come together to decide on when the closing date will take place. Expect all attorneys involved to show up including the bank’s lawyer.
Closing usually lasts 1 or 2 hours. You will be signing off on a lot of documents and assuming all goes well, you will be the official owner of your brand new NYC Co-op/Condo.
Who is Paper Street Real Estate LLC?
Paper Street Real Estate LLC is a boutique real estate firm located in Downtown Manhattan. We represent both buyer’s and seller’s in real estate transactions. From a seller’s stand point, we integrate the most modern methods to get your apartment as many views as possible. Aside from listing your property on the MLS, we utilize all forms of digital media to drive as much paid and organic traffic to your listing. Direct mail is still a powerful tool as well in today’s real estate market. Our firm will make a custom mailer campaign so all residential towers and buildings within the immediate vicinity of your apartment will be notified in the mail about your home being put on the market for sale.
From a buyer’s perspective, we become your representatives from beginning to end. Your apartment hunt will become our apartment hunt. You will get full access to all of our resources so we can find you the best home possible at a price point that you are comfortable with.
If you would like to list your property for sale or hire a brokerage to assist you in purchase a property, you can contact us at (646) 945-3727.