New York is a city comprised mostly of cooperative and condominium apartments with a smaller selection of private townhouses (limestone, brick or brownstone). To end up with the right home for you, it is important to understand the differences in property types and the nuances of the purchase process. In this section, Wald Real Estate has provided you with a more detailed description about the entire buying process.
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Steps to Perfect Home
1. If financing, get a pre-approval for a mortgage. Know how much you can spend before you begin your search. Sellers and their brokers will want to know that you are qualified to purchase their apartment before they will begin negotiations. Many brokers will ask you to fill out a personal financial statement.
2. Know your real estate needs. Size, number of bedrooms and bathrooms, building services and amenities and location. When you have found the right property be prepared to make an appropriate offer.. Offers are non binding and can be either in writing or by verbal communication. The seller may “counter” your offer thereby beginning the negotiation process in which both parties agree upon price, terms, and closing date.
3. Contract: It usually takes from 1 week to 10 days to negotiate the terms of a contract. All property transactions in New York City require a real estate attorney. Once negotiations are complete, the seller’s attorney will prepare a contract of sale during which time the buyers attorney will begin his/her due diligence. This includes reviewing and negotiating the terms of the contract, read the co-op or condo’s financial statements and by-laws, review the building’s offering plan, read the board meeting minutes, etc. Once due diligence is completed, you will sign the contract and submit a deposit of 10% of the purchase price. The contract is then forwarded to the seller for signature. The 10% deposit is held in the seller’s attorney’s escrow account until closing. Until the contract has been delivered and signed by all parties, the seller can still entertain and accept other offers.
4. Mortgage Commitment: Receiving a Commitment Letter from the lender can take anywhere from two to nine weeks. It is important to use a reputable mortgage broker or mortgage banker to expedite the process.
5. The Appraisal: After applying for a mortgage, your broker will receive a call from the Appraiser within a few days after the contract has been signed.
6. Purchase Application: Most contracts require that you submit your purchase application (Board Package) within 10 days of signing a contract unless you are financing the property, then the purchase application is due upon receiving your loan commitment, Your real estate agent will supply you with the board requirements and application materials. Board packages typically contain: an application, financial statement form and requests for all back-up materials, tax returns, bank statements, letters from bankers, accountants and employers, letters of personal and business reference, the contract of sale, and a bank commitment letter (if you are financing). When your package is complete, your agent will forward it to the Managing Agent for processing.. Once the Managing Agent determines that your application is complete and all credit checks are approved, your package will be forwarded to the Board of Directors. No application will be accepted by a Managing Agent unless it is complete. While co-op and condo packages look similar, the process is different. For co-ops, once your package is submitted, the Board will review your application. If your application meets initial approval, you will be interviewed by the Board. In the case of a condominium, there is generally no formal interview. Your application will be reviewed, and if all required materials are included and in order, an approval(Condominium Waiver) is typically granted.
7. The Coop Board Interview: The board interview is a short business meeting. Each cooperative has its own schedule set for meeting new applicants. Some co-ops meet on a monthly basis, others meet on demand.
8. Approval from the Board: Within 1-2 days after your interview, the Managing Agent will notify your real estate broker of your approval. Occasionally a board may ask for additional information.
9. Closing: Closings are generally set within 1-2 weeks after an approval. All parties to the transaction including the Managing Agent need to coordinate their schedules and set a mutually convenient date.
The Board Interview
The interview is the Board’s opportunity to meet you and perhaps ask questions about your application and tell you about the building.
1. A board interview should be treated no differently than a professional job interview. Dress in business attire!
2. Be prepared to answer questions about yourself and about your application including your finances.
3. Keep renovation issues at a minimum.
4. Let the board know that you are completely aware and respectful of coop living.
Cooperatives (Co-ops) are not a new concept for New Yorkers, but many out-of-towners are unfamiliar with this type of ownership. In NYC about 65% of apartments available for purchase are in cooperative buildings, while 30-35% are in condominiums or townhouses. This means that there is more inventory to choose from if a buyer includes co-ops in the mix of properties; typically, prices are more favorable for cooperatives because of supply and demand.
Cooperative buildings are owned by an apartment corporation. Individual tenants do not actually “own” their apartments as they would in the case of “real” property. Tenants own “shares” in the corporation which entitles them to a long-term, ongoing “proprietary lease” for a specific apartment. The corporation pays the total amount of the building’s expenses including mortgage payments (a co-op may have an underlying mortgage for their specific apartment on the entire building, whereas a condo must be owned outright), real estate taxes, employee salaries, and other expenses for the upkeep of the building. The tenant-owner, or “shareholder,” pays a share of these expenses as determined by the number of shares the tenant owns in the corporation. Share allocations are usually dictated by apartment size, view and floor level – space on a higher floor will have more shares associated with it than its counterpart on a lower floor.
Important considerations when buying a co-op:
• Each building has its own tax structure, but all co-ops offer tax advantages. Shareholders can deduct their portion of the building’s real estate taxes, and their share of the interest paid on the building’s underlying mortgage.
• Each cooperative determines the maximum amount of money that a buyer may be use to finance a purchase. Some buildings require substantial down payments(or all cash) ranging from generally from 20-50% of the purchase price.
• Subleasing must be approved by the Board of Directors of the co-op. Each corporation has its own rules, and they should be examined if a potential owner intends to sublet.
• Purchase Requirements: A purchase application usually consisting of a financial statement with supporting bank statements, tax returns, personal and business letters of reference is required by the Board of Directors.
Co-ops are generally not for investors.
Condominiums (Condos) are quite popular throughout the U.S., but arrived in New York in the late 1970s. A condo apartment is real property. Buyers get a deed just as though they were buying a house. The owner of record receives a separate real estate tax bill for their apartment.The owner is also responsible for paying monthly common charges representing their interest in the costs associated with operating the building(staff, common utilities, insurance, amenities etc.) There is no underlying mortgage on the building.
Condominiums are attractive for the following reasons:
• Financing the purchase of a condominium apartment is not restricted as it is in a coop. Financing is strictly an issue between the purchaser and a mortgage lender. It is theoretically possible to finance up to 100% of the purchase price.
• Purchase Requirements: When purchasing in a new development, there is no application. For re sales, a purchase application usually consisting of a financial statement with supporting bank statements, tax returns, personal and business letters of reference is required. However it is not as difficult as in a cooperative. The condominium has a right of first refusal to purchase an apartment if it chooses to do so at the same price of an outside buyer if the condominium wants to reject the sale. Condominiums are not in the business of collecting apartments, therefore passing the application process is much easier.
• There is greater flexibility in sub-leasing your apartment. This makes condos a better investment choice than co-ops. Most often, condominiums require a 1 year minimum sublet.
• Condominiums are the ideal choice for foreign buyers or for those with assets held outside of the United States. Condos are generally more expensive than co-ops.
TYPES OF RENTAL BUILDINGS IN NEW YORK CITY
In New York City there are three types of buildings in which you can rent an apartment: rental buildings, cooperatives (co-ops) and condominiums. Each of these types of properties has its own rules and regulations. It is important to understand the distinction between them, as this will influence the timing and parameters of your search for a home.
Closing Costs ── The Difference between Co-Operatives and Condominium in New York
An apartment in a building owned by a corporation or trust, in which each owner purchases stock representing the value of a single apartment unit and receives a proprietary lease as evidence of title. Shareholders pay a monthly maintenance fees to cover building expenses including real estate taxes the shareholders portion of the underlying mortgage(if there is one) Generally sales are subject to approval by a board of directors, and buyers must submit a purchase application (board package). The board will also require an interview. Financing and subletting is restricted in most coops.
– A multi-unit structure or property in which persons hold fee simple title to individual units and an undivided interest in common areas(lobby, halls, stairways etc) Each individual apartment gets a separate tax bill from the city. There is also monthly common charges for building expenses. Financing and subletting is more flexible.
*It varies if you own attorney. Check with bank/mortgage broker for additional fees . New York State Law requires a written letter of engagement if the legal fee will exceed $3,000. Non New York State residents should procure exemption for state transfer tax forms (TP584) . These are only estimates. Please confirm closing costs for specific transactions with your attorney and/or mortgage representative.