NYC Real Estate Buyers Guide 2011

8/7/2019 NYC Real Estate Buyers Guide 2011

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Holmes Team Buyer’s Guide

First things first: do I want a Coop or Condo?

Cooperatives

Cooperative apartments are more common in New York City than in any other city in

North America. Over 70% of New York City apartments available for purchase are in

cooperative buildings, which means less than 30% are condos. Because co-ops are more

strict in terms of subletting and there is an extensive board approval process needed to

purchase, they are less expensive by 20-30%. However, there are prestigious co-ops on

Central Park West, Fifth Avenue and Park Avenue that command some of the highest

prices of all apartments in the city.

In cooperatives, the individual owners do not actually own any real property: they ownshares in a corporation that owns the buildings/s that the apartments are part of. Share

amounts for each owner are determined by apartment size, exposure, views and floor

level, and that determines the monthly maintenance. At closing, resident owners receive

a stock certificate and a long-term proprietary lease, rather than a property title or deed.

Advantages of buying a coop:

1. Less cost per square foot.

2. Usually lower closing costs.

3. More property to choose from.

4. The Board of Directors has the right to “approve” or “reject” any potential buyer,

to give them control over who their neighbors are. The board, elected by all of the




tenant-owners of the co-op, interviews prospective buyers. There is more sense of

community in a co-op.

5. A portion of the maintenance is tax deductible. The amount accounts for an

owner’s allocated portion (by share) of the real estate taxes as well as the interest

portion on the building’s underlying mortgages payments.

Disadvantages of buying a coop:

1. Much more thorough and rigorous board approval process for buyers, both when

you buy and when you sell. When you sell, your prospective purchasers must go

through the same process as you when you bought the coop.

2. Down payment amount is typically at least 20%-25%, and sometimes more.

3. Subletting may be restricted or disallowed.

Keep in mind that most apartments for sale in Manhattan are Co-ops. Prior to

beginning your search, you should know what financing thresholds you will be able to

qualify for, including: 1) down payment you will have; 2) the portion of your monthly

income that will go to your housing payments and other monthly debt service (known as

your “debt to income ratio”); and the liquid assets you will have after you close on your

sale. Your Holmes Team agent can provide you with more information and for the

unique guideline for every co-op of your interest.

Condominiums

A condominium apartment is real property. You receive a deed and title and closing, and

you truly own a piece of real estate. Owners are responsible for paying their own real

estate taxes and property insurance (not payable individually in coops). In addition, there

is a monthly common charge used for the upkeep of the building, including staff salaries

and building maintenance, which is not tax deductible unless it is an investment

property. The greater the number of amenities, the higher the common charge.

Advantages of Buying a Condo:

1. Financing is flexible. There are usually no restrictions, except those imposed by

your bank. You can finance up to 90% in some cases.

2. Renting your unit is generally allowed. That's why condos are the favorite choice

for investors.




3. The application process for buying a condo is quicker and simpler than for a coop,

with the chance of rejection minimal. If the board rejects a buyer, they have to buy

the apartment themselves. This is called exercising their “right of first refusal” to

buy the property. Generally, that doesn’t happen.

Disadvantages of Buying a Condo:

1. There are fewer condos to choose from.

2. They are more expensive; the extra freedom and smaller supply translates into

higher cost.

3. Since condos have a greater number of investor units and higher turnover, condo

owners know fewer of their neighbors. Banks can offer terms that are not as

attractive to condo buyers because of lower owner occupancy.4. Your Holmes Team agent can guide you to your condo, if that's your choice.

The Buying Process

Buying an apartment in Manhattan can be a daunting task, but with the right

knowledgeable and personable broker, the experience can become fun, enlightening andrewarding. Here are the steps you should expect:

1. (Recommended): Choose one Real Estate Agent to work with. Choose the agent

you feel the most comfortable with and work with that agent exclusively. Your

loyalty to your agent avoids confusion and duplication of effort while securing a

partnership that works on your behalf no matter how long it takes. If you choose

to work with The Holmes Team, we will guide you through the entire process.

You will receive a Comparative Market Analysis for any property you would like

to make an offer on, to determine whether the property is priced right.

2. Talk to a Mortgage Banker or Broker - Your agent at the Holmes Team canrecommend the right professional. Before looking at properties, you must

know what you can afford. Based on your financial profile, s/he can quickly

determine what you can spend and how much you can borrow to finance your

new home. There is no cost or obligation to you for this service until you actually

apply for a loan.




3. Retain an Attorney - Brokers in New York City do not prepare contracts. You

must hire a real estate attorney. It is important to hire an experienced attorney

whose specializes in the laws of New York City real estate (in residential co-

ops, condos, townhouses). Your attorney will review the contract, the building’s

financial condition, the board minutes and the building’s by-laws.

4. Look at Properties - Most buyers look at an average of 15-25 properties prior to

making their purchase. When the inventory is low, you won’t be able to see as

many properties that match your search criteria and budget. Your Holmes Team

broker will schedule as many appointments as possible at places that meet your

criteria. Keep in mind that some apartments have limited showing times, and that

the best properties get snatched up quickly. Try to be as flexible as possible with

your viewing schedule.

5. Make an Offer - Once your broker finds you the right property, get ready for the

thrill of buying. Offers are made verbally in New York City and then in writing. Abid or offer will be placed through your Holmes Team agent to the seller or the

listing agent. The seller may make a “counter offer” and begin a negotiation

process until an agreement is reached about the price and terms. The negotiating

skills of your Holmes Team agent are top in the industry. Their expertise and

product knowledge will give you an edge in getting an accepted offer within your

satisfaction.

6. Sign the Contract - Once your attorney concludes that the contracts and

property conditions are satisfactory, you will be ready to sign the contract. At this

point you will generally deposit 10% of the sales price into the sellers’ attorney

escrow account. Remember that until the seller has counter-signed the contract,s/he is still free to entertain and accept other offers.

7. Gather your Financial Documents and References - For both your loan

application and your board application (if applicable), you will need to supply

detailed financial information. Most common are 2-3 years of tax returns, bank

and investment statements, business references, and personal reference letters.

The Holmes Team will help you though the process.

8. Obtain Financing - Your Holmes Team agent will help you to supply your

financial information as required by your bank. Your bank will review yourqualifications, appraise the property, and when the loan is approved issue you a

“bank commitment letter.”




9. Submit Board Package - Once your package has been prepared, a Holmes

Team agent will review it prior to submission. Only then will your package be

submitted for board review. Expect review time to last 2-6 weeks.

10.

Meet the Board of Directors (co-ops only) - The managing agent will schedule

an interview for you to meet the board. Some boards meet only once a month, sotry to make yourself available when your Holmes Team agent tells you that the

time has come. This board interview is a serious matter and should be treated as

such. You should arrive promptly and dress appropriately. Answer only the

questions you are asked without volunteering extra information. The Holmes

Team will train you and guide you through this process. Board decisions can be

given immediately or take up to one week from the interview date.

11. Inspection – The day before or the morning of the closing, the property is

inspected. Make sure to check all appliances, the removal of all personal property,

and that the premises are broom swept.

12. Schedule a Closing - Once you receive your board approval, you are ready to

“close.” Typical time from board approval to closing is 10-14 days to account for

late paperwork and filings, and the need to coordinate everybody’s schedule. Make

sure to get the exact check information from your attorney --and give yourself

enough time to obtain certified or bank checks. When it’s over, we’ll celebrate.

Don’t forget to pick up your keys!

Closing Costs For Coops:Own Attorney: Typically start at $1500. Consult your own Attorney Points: 0%-3% of loan amount (optional, but your rate can come down)Application Fee: $300Bank Attorney: $500Appraisal Fee: $300+Underwriting Fee: $350Misc Fees: $300Managing Agent Fee: $300

Judgment & Lien Search: $300UCC-1 Filing Fee: $20Move in Deposit: $500+ (sometimes refundable)Short Term Interest: up to 1 month (depending on closing date)Maintenance Adjustment: up to 1 month (depending on closing date)Mansion/Luxury Tax: 1% of purchase price if $1,000,000 or more.




For Condos/Townhouses

Own Attorney: Typically start at $1500. Consult your own Attorney Points: 0%-3% of loan amount (optional, but your rate can come down)Application Fee: $300Bank Attorney: $500

Appraisal Fee: $300+Underwriting Fee: $350Misc Fees: $300Managing Agent Fee: $300Tax Escrows: 2-6 monthsMortgage Tax: 1.75% of loan amount for loans under $500,000. 1.875% of loan amount forloans exceeding $500,000.Fee Title Insurance: $450-$650 per $100,000Mortgage Title Insurance: $250-$500 per $100,000Move in Deposit: $500+ (sometimes refundable)Short Term Interest: up to 1 month (depending on closing date)Common Charges Adjustment: up to 1 month (depending on closing date)Real Estate Tax Adjustment: 1-3 months (depending on closing date)Mansion/Luxury Tax: 1% of purchase price if $1,000,000 or more.

At closing, the seller is required to pay the New York State (.4%) and New York City (1% onsales of less than $500,000, and 1.425% when greater than $500,000, in most cases) RealProperty Transfer Taxes. In newly constructed and gut renovated buildings, developerstypically want the buyer to pay these taxes, plus their attorney’s fee. This is subject tonegotiation, and can add to the buyer’s closing costs.

Should You Try to Buy on Your Own orHave A Professional Help You? The

Advantages of Using Licensed Agents

1) YOU DON’T PAY FOR OUR VALUABLE SERVICES. You get a team of full-timereal estate professionals but don’t pay for our services-our fee is paid by the seller and splitwith the listing agent.

2) TRAINED, LICENSED, PROFESSIONAL, DEDICATED, and EXPERTADVOCATES - ON YOUR SIDE. Real estate transactions can be complicated and risky,that is, unless you have expert advice. When making the financial commitment to invest inreal estate, most buyers find it indispensable to have an experienced advocate on their side toevaluate opportunities and negotiate the best price. Remember, when listing agents aretrying to sell a specific property, they are working for the seller, trying to negotiate the




highest price. That’s why more than 90% of buyers use their own agents to represent themwhen they buy.

3) HELPING YOU MAKE THE MOST OF ALL THE INFORMATION THAT ISOUT THERE IN THE PUBLIC DOMAIN. There is so much information out there.What’s really relevant? What pricing information is correct? What kind of information are

you going to base your buying decisions on? We help you discern the knowledge from thenoise and the trends.

4) NOT JUST ACCESS TO EVERYTHING ON THE MARKET BUT A DISCERNING EYE TO INTRODUCE YOU TO PROPERTIES THAT MATCHWHAT YOU’RE LOOKING FOR. Before the advent of the internet, buyers needed realestate agents just to identify properties that were for sale. Now you can see most of what’son the market with the click of a mouse. But licensed agents have access to moreinformation about properties than is available to the general public, things like requirementsfor purchasing in specific coops, access to properties that are in contract but that haven’tclosed, etc. And our team is already familiar with most buildings. You don’t want to getexcited about purchasing something you like only to discover that it won’t work for you, orthat you won’t get approved by the building’s coop board. We make sure that you view properties that really match what you are looking for AND that you’ll be able to purchase.

5) EXPERT FINANCIAL EVALUATION. When you decide you want to make anoffer on a specific property we conduct a Comparative Market Analysis (CMA) for you toevaluate what the market says that property is worth TODAY, not what it was worth 4 or 5months ago. As licensed real estate agents and members of the Real Estate Board of New York (REBNY), we have access not only to historical sales data but also to information forproperties which are under contract but that haven’t closed yet. This data is not available tothe general public, yet is crucial when evaluating what the real market value of a property is.

6) ACQUIRING HIDDEN KEY INTELLIGENCE. As agents we can uncovervaluable information about the seller’s motivations from the listing agent or the seller, whichcan be key to getting you the best price.

7) AS PROFESIONALS WE NEGOTIATE THE LOWEST PRICE AND BESTTERMS BETTER THAN YOU CAN DO ON YOUR OWN. Using the ComparativeMarket Analysis and other information we learn, we craft the best strategy to help you buy the property and get you the best price.

8) MANAGING THE ENTIRE PROCESS. We carefully manage the entire buying process for you by paying attention to every detail, from helping you get pre-approved for a

mortgage, to putting together a successful board package, to guiding you through the coopboard or condo approval and interview processes. And remember, you don’t pay for it!

For further information, or to talk directly with a member of The Holmes Team about yourreal estate needs, please call 212-381-2280