A Guide To
Buying in New York City
Max Collins Associate Broker 38 East 61st Street New York, NY 10065 212.606.7720 | 914.715.0117 max.collins@sothebyshomes.com
ASSEMBLING YOUR TEAM Max Collins - Associate Broker
Max Collins has been with the Sotheby’s International Realty brand since 2011 and is known for his utmost professionalism and discretion—assets highly valued by clients that include company CEOs, celebrities, and developers. Raised in a family of top-producing real estate professionals, Max has both an innate sense for buying and selling as well as a passion for the power of research. He combines these skill sets to provide his clients with an unmatched level of service. Max analyzes New York City’s market conditions through multiple lenses and translates the numbers into a tailor-made strategy to meet his clients’ individual goals. A native New Yorker, Max was born and raised in Manhattan and Westchester County. He attended Grace Church School in Manhattan, Bronxville High School, and earned his Business Administration degree at George Washington University in Washington, DC. He currently lives in Manhattan, where he is an avid doubles squash player and also serves on the Junior Board of Columbia Presbyterian’s Naomi Berrie Diabetes Center
MORTGAGE BANKERS / BROKER • • • • •
Assess borrowing capacity Evaluate financial strength of collateral for co-op, condo or townhouse Develop financing options based on buyer’s objectives Provide Pre-Approval for targeted transaction(s) Coordinate legal/financial diligence and contract terms with Realtor and Attorney on strategy
REAL ESTATE ATTORNEY • •
• • • • • • •
Perform thorough due diligence review of all documents related to the apartment and condominium or co-op. Documents include offering plan, amendments, bylaws, rules and regulations, board minutes, financial statements of the co-op or condominium for the last two years, the proprietary lease (for co-ops), assessment history, construction and repair, underlying mortgage and any lawsuits. After the real estate broker comes to terms of the deal, the seller’s attorney will prepare the contract and send it to buyer/buyer’s attorney for review. Attorney reviews terms and conditions in the contract with purchaser. Most attorneys will negotiate with the seller’s attorney to include an additional rider or language to protect buyer’s interest further. Once the contract is agreeable on both sides, the buyer will sign the contract first and send it back to the seller’s attorney along with 10% down payment. Order a title report (condo) or judgment and lien search (co-op). This is to identify any liens or encumbrance files against the seller or property prior to closing. Coordinates closing with seller’s attorney, lender’s attorney and building’s managing agent. Prepares closing statement that includes a list of the bank and personal checks required. After the closing, the attorney will provide closing statements and copies of all documents signed at closing.
TERMS AND FEES TO KNOW ASSESSMENTS: An amount of money that a condominium/cooperative trust needs owners to pay in order to finance a project or outstanding debt that was not part of the annual budget/assessment. These projects are for the common good of the building whether it be hallways, lobbies, roofs, mechanical systems, water or even the building façade.
COMMON CHARGES: A condo fee that includes building operating costs and management fees. FLIP TAX: A fee paid by a seller or buyer when purchasing in a co-op. It is not a government tax. It is a transfer fee to profit the building on the sale on an apartment. Flip tax can be negotiated or a co-op will have a strict rule on whether buyer or seller pays.
MAINTENANCE FEE: A co-op fee that includes utilities, building insurance, property tax and staff salaries. A percentage can be tax deductible but varies by building. MORTGAGE CONTINGENCY: A provision in a purchase contract saying that if the prospective buyer cannot get a mortgage within a fixed period of time with the specified terms, the buyer can call off the whole deal and get back his deposit.
PROPERTY TAX ABATEMENTS: The government grants a reduction or exemption from taxes for a specific period in order to stimulate real estate or industrial development. The most common is 421a - this exemption lasts for 10 years, giving owners a 100 percent exemption from any increases in their real estate taxes for two years, then phasing out the exemption by 20 percent every two years over the remaining eight years. In Upper Manhattan and the outer boroughs, the exemption can last for 15 or 25 years.
PROPRIETARY LEASE: A lease given by a cooperative corporation that provides the share owner with the right to live in a particular unit or apartment.
REAL ESTATE TAXES: For a condo, this is a separate NYC tax bill. SUBLETTING: Leasing to a subtenant. Ex: If you own a co-op you are subletting to a renter because you have a proprietary lease with the co-op. 2 | A GUIDE TO BUYING IN NEW YORK CITY
COOPERATIVES VS. CONDOMINIUM CONDOMINIUM
COOPERATIVE Own shares in the corporation, which owns
OWNERSHIP
Own the real estate comprising
the cooperative and leases
your apartment
the apartment Requires board review of
APPLICATION PROCESS
Requires board review
application and interview
of application
of purchaser
Have right of first refusal - the condo board
APPROVAL
Can accept or reject
can review purchaser but cannot reject
purchaser without reason
without exercising right of first refused to purchase the apartment
FEES DOWN PAYMENT & FINANCES AFTER PURCHASE
Maintenance Fees - include
Common Charges - include building
utilities, building insurance,
operating cost, management fees, taxes (real
property tax and staff salaries
estate taxes levied on apartment)
Variable - building
Most only require 10% down
Specific - sometimes financing
payment, and proof of funds to purchase.
not permitted
DOCUMENT PREPARATION These documents will be presented to the seller in an offer and will prove to the seller the buyer is ready, serious and qualified for the apartment. This is very advantageous in negotiation and ultimately in closing the deal quickly.
MORTGAGE PRE-APPROVAL FORM This is a letter you will get from your bank/mortgage broker. If financing, this is important for the seller to know you have been approved for a certain amount and have already begun the process of obtaining a mortgage.
REBNY FORM This is an industry standard Real Estate Board Of New York form that will summarize all of your financial information. This will be critical for the seller as to confirm you have the funds to purchase the apartment and can pass board approval. Please note that the entire form does not need to be completed at this point in the process but include: cash in banks, stocks and bonds, income and liability and anything else in your financial profile that stand outs.
COOP FORMS Specific Coops may require additional forms to be filled out in advance
TIMELINE TO CLOSING
1
Pre Approval Same Day - 2 Days
3
Negotiation 1 Week
Offer
2
1 - 3 Months
4
5
Contract 2 Weeks
Offer Acceptance 1 Day
7
Board Approval 1 Week - 30 days
6
Financing 2 - 4 Weeks
8
9
Closing 1 - 3 Hours
Move In/ Walk Through 1 Week
© MMXVIII Sotheby’s International Realty, Inc. All Rights Reserved. This material is based upon information which we consider reliable but because it has been supplied by third parties, we cannot represent that it is accurate or complete and it should not be relied upon as such. This offering is subject to errors, omissions, changes including price or withdrawal without notice. If your property is listed with a real estate broker, please disregard. It is not our intention to solicit the offerings of other real estate brokers. We are happy to work with them and cooperate fully. Sotheby’s International Realty and the Sotheby’s International Realty logo are registered (or unregistered) service marks used with permission. Operated by Sotheby’s International Realty, Inc. Real estate agents affiliated with Sotheby’s International Realty, Inc. are independent contractor sales associates and are not employees of Sotheby’s International Realty, Inc. Equal housing opportunity.
3 | A GUIDE TO BUYING IN NEW YORK CITY
MORTGAGE & PRE-APPROVAL PROCESS ATTAIN PRE-APPROVAL, SAME DAY - 2 DAYS • • •
Pre-Approval is a preliminary indication of borrowing capacity based on application information and a hard credit pull. Pre-Approval is subject to verification of complete documentation regarding credit, income, assets and the subject property collateral. Employed: 2 years W2, YTD Pay Stub, 2 months bank statements
•
Self Employed: 2 years Tax Returns, Business Returns, K1’s
MORTGAGE COMMITMENT LETTER, 2-4 Weeks •
Formalizes Pre-Approval based on official underwriting
COMMITMENT TO LEND SUBJECT TO • •
Appraisal of property Title
•
Project Approval
CRITICAL COMPONENT FOR •
Co-op/Condo Board Submission
•
Managing Non-Contingent Contract Risk
COMMITMENT LETTER REQUIREMENTS Full documentation regarding credit, income, assets and the subject property collateral that is reviewed and approved by the Bank’s underwriting department. Commitment Letter is typically binding subject to the conditions stipulated there in and the expiration date.
REAL ESTATE ATTORNEY COST AND FEES, PURCHASER’S CLOSING COSTS DESCRIPTION:
COST:
1
ATTORNEY FEE:
$2,500 - $3,500+
2
MOVE-IN DEPOSIT (refundable):
$500 - $1,000
3
MOVE-IN FEE (non-refundable):
$250 - $1,000
MANSION TAX (for purchases over $1M):
1.00% $1,000,000 - $1,999,999 1.25% $2,000,000 - $2,999,999 1.50% $3,000,000 - $4,999,999 2.25% $5,000,000 - $9,999,999
4
BANK/FINANCING FEES:
Varies (application fee, commitment fee, underwriting fee, appraisal, etc.)
5
BANK ATTORNEY LEGAL FEE:
$850 - $1,000
6
UCC-1 FILING FEE:
$75 - $125
7
PURCHASE APPLICATION FEE:
$500 - $1,000
8
COOP PURCHASES ONLY: 8a Coop Application Fee:
$500 - $1,000
8b Judgment and Lien Search Fee:
$250 - $350
8c Financing/Recognition Agreement Fee:
$150 - $250
8d Flip Tax Value: 9
on whether buyer or seller pays
9a Title Insurance:
Approximately $4 per $1,000 of sales price (regulated by NYS law)
9b Mortgage Title Insurance:
Varies according to loan amount
9d NYS Mortgage Recording Tax:
4 |
1.425% - 1.825% transfer fee. Flip tax can be negotiated or a co-op will have a strict rule
CONDO/TOWNHOUSE PURCHASES ONLY:
9c Searches and Recording Fees:
10
3.25% $10,000,000 - $14,999,999 3.50% $15,000,000 - $19,999,999 3.75% $20,000,000 - $24,999,999 3.90% $25,000,000+
$1,000 - $1,200 • 2.05% of the loan amount if mortgage is less than $500,000 including 1% NYC tax • 2.175% of the loan amount if mortgage is $500,000 or more including 1.125% NYC tax
NEW CONSTRUCTION PURCHASES ONLY: 10a Sponsor’s Attorney Fee:
$1,800 - $3,500
10b NYC Transfer Taxes: NYS Transfer Taxes:
1.0% if price if price is $500,000 or less
10c Working Capital Fund Contribution Fee:
Equal to 1-2 month’s common charges
GUIDE TO BUYING IN NEW YORK CITY
1.425% if price if price is $500,000 or greater
0.4% of price if price is under$2,999,999 0.65% of price if price is $3,000,000 or greater