Archive for Buying Guide
Steps to Purchasing a Co-op or Condo Apartment in Manhattan
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Assuming that you’ve found the property on which you wish to place an offer you’ll find the steps to purchasing a co-op or a condominium in Manhattan are very similar.
By now, to put yourself in the strongest possible negotiating position, you’ve put together your buying team, spoken to a bank or mortgage broker (if financing) and have been prequalified for a mortgage.
- Offers are made in writing and/or orally in New York City. When you have found the right property, a bid or offer will be placed through your buyer’s agent. He/she will convey your offer to either the seller’s agent or to the seller directly. The seller may “counter” your offer. This will begin a negotiation process that will eventually lead to a “meeting of the minds,” at which point price, terms, and closing date have been agreed upon.
- A real estate attorney is required in all property transactions in New York City. Contact an attorney familiar with real estate in Manhattan to represent you. The seller’s attorney will begin preparation of a contract of sale, and during that time your attorney will begin to examine the financial condition of the building in which you wish to purchase. Your real estate agent can assist you in finding experienced attorneys.
- After your lawyer concludes that the financial condition is satisfactory, that the by-laws of the building are acceptable to you, and that the contract of sale is also acceptable, your attorney will allow you to sign the contract. At that time you will usually be required to present a deposit of 10% of the purchase price. The contract plus the deposit will then be forwarded to the seller for signature . This money will be held in the seller’s attorney’s escrow account until closing. It is important to note that until all parties have signed the contract, and it has been delivered, the seller can still entertain and accept other offers.
- If financing, you should move forward with your loan application. If you’ve already been prequalified, this process will be greatly simplified.
- You will, by now, have received from your real estate agent the board requirements and application materials. The application materials can be similar for a cooperative and condominium. However, the actual process is quite different. You will need to complete all of the required materials which typically include: an application, a financial statement signed by a CPA, all requisite support for your financial statement, three years of tax returns, bank statements, letters of personal and financial reference, letters of professional reference, the contract of sale, bank documents (if financing) indicating that your loan is in place, etc.
- When your “package” is finished, it will be reviewed and then, assuming it is complete, it will be forwarded to the seller’s agent or directly to the building’s managing agent for review. Upon determination that it is in order and that credit checks were acceptable, it will be forwarded to the Board of Directors. No applications will be accepted by a Managing Agent unless they are complete.
- In the case of a cooperative, if your application meets initial approval, you will be invited to be interviewed by the Board or by an interviewing committee. This is a serious matter and not to be taken lightly. It should be treated as a business meeting.
- After approval by the Board, you are ready to begin planning for a closing!
The steps to purchasing a co-op or a condominium in Manhattan are very similar. Let’s assume that you have found the property on which you wish to place an offer. By now, to put yourself in the strongest possible negotiating position, you’ve put together your buying team, http://realestategeezer.com/category/buying-guide/build-your-team/ spoken to a bank or mortgage broker (if financing) and have been prequalified for a mortgage.
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 is typically granted. The entire process can move quickly in a condominium, and assuming a loan can be secured in a timely manner.
What’s The Difference Between a Co-op and a Condo?
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Caught in the maze of buying an apartment in New York City? The rules are different in New York City than in other parts of the country! For the inexperienced some of the differences may be perplexing, however, we can guarantee that if you do your homework and keep this guide handy, the process will flow much more smoothly.
New York is a city comprised mainly of cooperative and condominium apartments with a smaller selection of private homes, which we call townhouses or brownstones. Most important is understanding the differences between the types of apartments you will find in Manhattan.
Co-operative Buildings
Cooperatives are not a new concept, although they seem to be a type of ownership that is more common in New York City than elsewhere in the United States. In New York City, approximately 80% of our apartments available for purchase are in cooperative buildings, while 20% are in condominiums. This means two very simple things to potential buyers in New York City:
- There is more inventory to choose from if the buyer includes co-ops into the mix of properties, and
- Prices are, in general, more attractive for cooperatives – simple supply and demand.
Cooperatives are owned by an apartment corporation. Individual tenants do not actually “own” their apartments as they would in the case of “real” property. Owners, (shareholders) of co-op apartments, actually own “shares” in the corporation which entitles them to a long-term “proprietary lease.” The corporation pays the total amount of the building’s mortgage (importantly, a cooperative may have an underlying mortgage on the entire building, whereas a condominium building must be owned outright), real estate taxes, employee salaries, and other expenses for the upkeep of the building. The tenant-owner, in turn, pays a portion of these expenses as determined by the number of shares the tenant owns in the corporation. Share amounts are dictated by apartment size and floor level.
The considerations when buying a cooperative are:
- The Board of Directors has the right to “approve” or “reject” any potential owner. The board, elected by all of the tenant-owners of the co-op, interviews all prospective owners. It has the responsibility of protecting the interests of all tenant-owners by selecting well-qualified candidates.
- The quality of services and the security of the building are kept at high standards.
- Portions of the monthly maintenance are tax deductible. Each building has its own tax structure, but all co-ops offer a tax advantage. Shareholders can deduct their portion of the building’s real estate taxes, as well as their proportionate share of the interest on the building’s mortgage.
- The amount of money that may be financed is determined by each cooperative. Some buildings require substantial down payments. Generally speaking, in Manhattan prospective purchasers should be prepared to “put down” at least 20 to50% of the purchase price (depending on the building) when purchasing a cooperative apartment.
- Subleasing a co-op must be approved by the Board of Directors of the cooperative. Each corporation has its own rules, and they should be examined if a potential owner intends to sublet.
With this in mind, it is important to remember that co-ops are the norm here in Manhattan, not the exception. However, before beginning a search for a cooperative apartment, think about the financing limitations and the application and interview process.
Condominium Buildings
While condominiums are quite common throughout the country, they are a rather new concept for New York City. A condominium apartment in Manhattan is real property. The buyer gets a deed just as if he were buying a house. Since this is real property, there is a separate tax lot for each apartment. Hence, this means the buyer pays his own real estate taxes for the property. An owner will also pay common charges on a monthly basis. Common charges are similar to maintenance in a cooperative. However, they will not include real estate taxes since these are paid separately, nor will they include the building’s mortgage and interest given that a condominium, by law, cannot have an underlying mortgage. Condominiums are attractive for a variety of reasons:
- Financing the purchase of a condominium apartment is governed by the financial markets not a board of directors and thereby much more flexible than in a cooperative. In the past, a buyer could finance up to 90% or more of the purchase price. However, with the current conservative credit practices, you should be prepared to “put down” about 20% or more even for a condo.
- An approval process is usually required, and most condo boards are requiring application packages with financial disclosure. Generally, however, the requirements are not as rigorous as the co-op boards. A board meeting may or may not be required. The length of time for approval varies from building to building, but it is usually not as long as a co-op approval process.
- There is greater flexibility in sub-leasing your apartment. This makes condominiums the better choice for investment property.
- They are the ideal choice for non-U.S. citizens or for those with their assets held outside of the United States given that co-ops are unlikely to approve a buyer whose funds are not in the U.S.
Given that there are fewer condominiums than cooperatives and that they are “easier” to purchase, they are generally more expensive than co-ops. Additionally, monthly combined common charges and real estate taxes in a condo are typically less than a co-op’s monthly maintenance charges, again resulting in higher purchase prices.
Excerpted and modified from Prudential Douglas Elliman.
It’s a Buyer’s Market – Manhattan Prices are Down and Cash Is King
Posted by: | CommentsBuyers who can pay in full in cash for their co-op or condo apartments are in the driver’s seat. Right now, being able to offer a seller a sure thing – with no surprises on the way to closing – will go a long way to assuring you of negotiating the best possible deal.
Pair some flexibility with cash, and you’ve got the magic ingredients of what I call FLASH. Being flexible means being open to the seller’s needs in terms of setting the closing date – being ready to close immediately or allowing ample time for the seller to find a new home rather than demanding a quick move – offering to take care of needed repairs or accommodate the start of a school year. With FLASH, you’ll find that the door to your new home is open, ready and waiting.
If you’re like most people – who can’t afford a full-cash sale – you can still find yourself in the “most attractive buyer” finals. If you have great credit and can put down at least 20% on a jumbo conforming mortgage (up to $729,750 in New York), or at least 30% for higher mortgages, you’ll still set setting hearts aflutter. Pre-qualifying for an adequate mortgage is a fabulous move to round out your VIP buyer profile
Manhattan Homes, Apartments and Amenities – A Glossary
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Is this really a 2 bedroom apartment?
I realized when I did the post of some of the most annoying words in real estate (and real life) that some of the terms used to describe New York City apartments were inaccurate or misleading.
The most common errors can be found in the room count where alcoves are called rooms (a 3.5 room apartment called a 4 see floor plan left), balconies are called terraces, and the number of bedrooms is just plain wrong/inaccurate and should be called half rooms.
Perhaps more than any other U.S. city, Manhattan has its own distinctive types of housing and there are some standard terms used to describe them. Knowing the differences can help you choose the best apartment and neighborhood for your needs and your lifestyle. Let’s define the terms:
Alcove/Alcove Studio
An alcove is an area that’s usually less than 70 square feet adjoining the living room. May be called a half room, often used as a dining room, bedroom or home office. May have a wall added to create a separate room. To be a “legal” bedroom it must be at least 80 to 100 square feet, have a window and a closet.
An Alcove Studio is an apartment with an alcove, often in an L shape.
Balcony
Outdoor space of an apartment projecting out from the building’s façade
Brownstone
Built as luxury homes in the 1800s through the 1930s, brownstones usually have four to six floors and are row houses, sharing side walls with adjacent homes. They may be single family town homes or they may have been converted to co-ops or condos. Likely to have features especially desirable to lovers of old homes – spacious rooms, high ceilings, lots of wood floors and ornamental trim, fireplaces, and yards or gardens. The term comes from the brown sandstone used on the building exteriors. Brownstones don’t lend themselves to doormen, and rarely have them.
Classic
Larger apartments, usually pre-war. Indicates the apartment has a formal dining room. Usually used with the number of rooms, like a “Classic Six”, typically a living room, dining room, kitchen, two bedrooms and a maid’s room.
Condo
Condo, short for condominium, is an alternative choice for apartment ownership. When you buy a condo, you own your apartment outright just like you would own a single family house. You don’t have to go through the board approval process. You have more control over your home and usually, you can rent it or sell it to anyone you choose. More
Co-op
Co-op means cooperative ownership. Rather than owning your apartment, you become a member of the corporation which owns the entire building and you own shares in that corporation. Your ability to buy, sell or rent the property is subject to board approval. More
Condop
A condop is a co-op with less restrictive condo-type rules. With condops you own shares in the co-op but the rules are often more relaxed than the standard co-op. Condops, like most condos, may allow you to finance a higher portion of the price, rent out the apartment and sell it to anyone you choose with no board approval. More
Convertible, Junior or Flex (also see Alcove)
An apartment with an alcove off the living room. May be listed as a Junior 4, which would mean a traditional living room, bedroom and kitchen plus a living room alcove that may be converted into a separate room or bedroom. To be a “legal” bedroom it must be at least 80 to 100 square feet, have a window and a closet.
Duplex
In New York, an apartment on two floors.
Elevator Building
Generally don’t have doormen; most provide intercom and security systems as well as elevators.
Flip Tax
A flip “tax” is something of a misnomer. Rather than a tax levied by the government, it is an income generating fee used by some co-op’s and, much less frequently, by condos. As determined by the co-op board or condo association, the fee can be on the profit of the sale, a fixed amount, a percentage of the gross or net sale or a fee per share. The co-op or condo by-laws determine if the buyer or seller has to hand over the check. In reality however who pays the flip tax is determined by market conditions and contract negotiations.
Floor-through
Apartment that occupies an entire floor or half floor of a building. Usually found in low-rise walk-up buildings.
Full Service Building
Built from the 1980s to present modern (but could be pre war as well),, more likely to have facilities such as fitness centers, and both doormen and concierges. Many offer garages.
Half Room (see also Convertible, Junior or Flex)
Usually an alcove, sometimes a large foyer that might be used as a room.
Loft
Usually conversions of former commercial or factory buildings, though some are new construction. Feature very open floor plans, may have period details such as supporting columns. Ceilings are high, up to 20 feet and large windows are common. Utility pipes are often exposed. Doormen unlikely.
Loft Area
In buildings with very high ceilings, similar to a partial second floor accessed by stairs or a ladder. Often used as a bedroom or storage area.
Maisonette
This apartment is usually found in mid and high rise buildings. Has its own entrance to the street like a town house and usually is two stories. Could have access through the lobby of the building as well. A building may have several maisonettes.
Number of Rooms
Other than kitchens, to be counted as a room a space must have at least 100 square feet and a window. Any kitchen except a Pullman is usually considered a room. Baths are not counted as rooms. A three-room apartment is usually a living room, kitchen and bedroom. A four-room would usually have two bedrooms, or one bedroom and a separate dining room.
Penthouse
Apartment on the top floor of a building usually includes an outdoor area (see terrace) on the roof.
Pied-a-terre
Apartment the owner doesn’t use full-time. Typical example would be someone who lives in the apartment when visiting from his/her primary residence.
Post-War
Built in the late 1940s through 1980s, with more modern amenities such as larger closets, laundry facilities, and larger spaces in smaller apartments – studios as well as one and two bedrooms. Fewer architectural details, fireplaces, etc., both inside and out. Most have doormen and live-in superintendents. May be co-ops or condos.
Pre-War
Built before the mid-1940s, or World War II, virtually always co-ops. Tend to have high ceilings, large rooms, and features like wood floors, decorative trim and fireplaces. Usually 10 to 20 stories. May have doormen.
Pullman or Petite Kitchen
The kitchen is a strip along the living room wall, rather than a separate room. Most common in hotels converted to apartments.
Studio Apartment
The living and sleeping areas are combined. One rooms have Pullman kitchens, two rooms have separate kitchens.
Terrace
Typically larger than a balcony and is open to the sky. Can be part of the building’s roof as in a penthouse or could occupy a building’s setback.
Town Houses
Self-contained homes. In Manhattan, these are likely to be brownstones, typically row houses sharing side walls. Can be single or multi family home and/or could have been converted to a co-op or a condo.
Triplex
In New York, an apartment on three floors.
Walk-Ups
Usually four to five stories with no elevator, built as pre-war apartments. Overall the least expensive kind of apartments in Manhattan. Unlikely to have doormen.
The Search – Starting Out Right Can Save Serious Money and Make You the Favored Buyer
Posted by: | CommentsVisiting open houses, scanning the Internet sites and dreaming of where you’ll place your sofa is all well and good, but when it’s time to get serious about buying a new home, there are some basic steps that will position you to find the right place and get the best deal.
Once you’ve decided you want to buy and that your financial basics look sound, the smartest thing you can do is put together your own dedicated search team – a buyer’s broker, a real estate attorney and a bank/mortgage broker. Choose carefully and make sure they are well-versed in real estate in New York City. Ask them about their experience.
Buy Into a Buyer’s Broker
A buyer’s broker will help you at every step of your purchase, from helping you figuring out what kind of apartment you want at the price you can afford, to the subtleties of the co-op interview.
Make sure you like your broker – you’re likely going to be spending a lot of time together. Be sure that he or she listens to you and really hears what you’re saying. Otherwise, you’ll spend a lot of time seeing spaces you’re not interested in. Want a big kitchen? Lots of light? Outdoor space? An older, pre-war building with lots of charm or a brand new, sleek and modern place, a view of the Empire State Building? If he or she can’t get into your head, the search process won’t be as pleasant as it should be.
Be aware that most agents in New York are seller’s brokers. If you meet an agent at an open house, for example, you need to keep in mind that you’re speaking with the seller’s representative. Any hints you give about how much you’re prepared to spend will be reported back to the seller – in which case, you’re likely to spend top dollar.
Why? Because you’re chatting with a seller’s agent, whose top priority is to show the property in its most favorable light and negotiate the highest price and best terms for the seller. New York law is crystal clear on the duty of listing and selling agents – they must provide “undivided loyalty” to the seller. So if they can figure out how much you’re prepared to spend, their job is to make sure you spend every cent.
The seller’s agent may offer to have another agent at their firm to act as your representative in making an offer and negotiating for the purchase. That’s perfectly legal, but being asked to step in and assist the buyer at the last minute may not be the ideal scenario. First and foremost, it doesn’t give the buyer the advantage of having a dedicated advocate for his or her needs nor can he or she negotiate as effectively as a buyer’s broker who has been working with you all through the process.
Be Prepared
The other representatives you’ll need when you want to buy a property are a banker/mortgage broker and a real estate attorney.
Finding a good banker and pre-qualifying for a mortgage will not only make you an attractive buyer to all those folks hoping to sell their homes, but it will also ensure that you’re looking in the right price range. A loan officer should request your credit score to do a pre-approval letter, stating that you qualify for a mortgage up to a stated amount (you’ll need to pay for a credit check, usually $20 or less), and be able to explain what kind of rates and mortgages her or his company could offer you today along with what information they will need if you apply for a mortgage with the company. You’ll know exactly what you can – and can’t afford. You won’t fall in love with something you can’t have – and when you do find that perfect place, you’ll be in a strong position to negotiate for it.
Locating a real estate savvy attorney will also smooth the way. An attorney in addition to being expert in New York City real estate, should be well-versed in reviewing co-op and condo financial statements (your accountant could help here), should plan to read its board meeting minutes to look for items like upcoming expenses, lawsuits pending etc. and be familiar with the latest inclusions/exclusions in NYC real estate contracts.
So, first things first.
When you decide to start looking, take time to find the right folks to ensure your search is a success– your buyer’s broker, real estate attorney, and loan officer. You can call around, ask friends – and even ask prospective members of the team to recommend others they’ve worked with in the past.
With your team lined up, you’re ready to look, and to buy. Now, about that sofa …
Manhattan Co-op Board to Madonna: Be Quiet Or Get Out!
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Madonna’s Upper West Side co-op board is threatening to evict the Material Girl. According to a lawsuit filed by her upstairs neighbor Karen George, Madonna is using her Central Park West pied a terre ” as a rehearsal studio, forcing neighbors to endure “blaring music, stomping and shaking walls,” for up to three hours each day.
When a colleague sent me this link reporting the story, I remembered a similar problem that my wife and I had with an upstairs neighbor (not music- but walking both human and canine). Fortunately, carpeting resolved the problem and our “quiet enjoyment” was restored. If you live in New York City you should expect noise from police cars to fire engine sirens, horns and car alarms, garbage trucks and yes from your neighbors as well.
If you are moving from a quiet suburban neighborhood or if you are particularly sensitive to noise here are some suggestions to test your decibel tolerance before you buy an apartment in Manhattan.
- If the apartment is located near an elevator, public laundry room or trash room make sure mechanical noises can’t be heard.
- Check to see if the windows have been upgraded to reduce street noises as well as energy costs.
- Depending on the floor of the apartment, you may want to listen carefully- especially in rear courtyard facing rooms-for fans and other mechanical noise creating devices on adjacent rooftops.
- Ask the seller’s/showing broker to turn off or lower any music playing in the apartment.
- Before signing the contract, visit the apartment at different times of the day. A morning visit will expose the going to work noises, an afternoon visit will let you concentrate on street and traffic sounds and the evening visit may give you some insight into the level of noise you can expect from prospective neighbors are reading or blaring their music or TVs?
- As part of your due diligence, you and/or your attorney should read the co-op or condo meeting minutes and see if there are any noise issues discussed.
Generally speaking, a co-op board will have more jurisdiction and clout over noise matters. Based on their bylaws a co-op board may be able to levy fines until the offending shareholder complies or, as with Madonna, threaten and ultimately have the shareholder evicted. Condos generally do not have this power and, it may be completely up to you to bring any legal pressure on your fellow condo neighbor.
Who Represents Your Best Interests When Buying A Co-op or Condo in Manhattan?
Posted by: | CommentsIf you are planning to buy or thinking about buying an apartment in New York City, it’s smart to get expert help from the beginning. Touring apartments is just the beginning; buying one is more complicated.
If you tour open houses, you’ll meet real estate agents, virtually always the seller’s agents. There are several different kinds of agents and it’s important to know the how they work.
Listing Agents
Listing (or seller’s) agents are the ones with whom the seller has listed his or her property. A seller’s agent promises to take reasonable care, provide undivided loyalty, confidentiality, full disclosure, obedience and duty to the seller. That means their top priority is to show the property in its most favorable light and negotiate the highest price and terms for the seller. In other words, the listing agent owes complete fiduciary responsibility to the seller.
Buyer’s Agent
Conversely, the buyer’s agent is engaged by the buyer to represent his or her interests. The buyer’s agent is completely motivated to make sure that you get the best possible deal. He or she negotiates the purchase of the home you want at a price and on terms most favorable to you. A buyer’s agent promises to take reasonable care, provide undivided loyalty, confidentiality, full disclosure, obedience and duty to the buyer. In other words, he owes complete fiduciary responsibility to the buyer.
Dual Agent
A real estate broker may represent both the buyer and seller if both buyer and seller give their informed consent in writing. For example, if you visit an open house, you might meet the seller’s agent as you tour the home. Should you decide to buy – or make an offer on – the property, you might ask that agent to represent you. In that case, the agent will not be able to provide the full range of fiduciary duties to both buyer and seller. The agent must explain the possible effects of dual representation, including that by consenting to the dual agency relationship the buyer and seller are both giving up their right to undivided loyalty. A buyer should carefully consider the possible consequences of a dual agency relationship before agreeing.
Dual Agent with Designated Sales Agents
If the buyer and seller provide informed consent in writing, the real estate brokerage firm may designate a sales agent to represent the buyer and another sales agent to represent the seller to negotiate the purchase and sale of the property. A designated sales agent cannot provide the full range of fiduciary duties to the buyer or seller. The designated agent must explain that like the dual agent under whose supervision they function, they cannot provide undivided loyalty.
So if you are a buyer, a listing or seller’s agent can not advocate for the best deal you can get. If the seller has an agent totally dedicated to their interest, buyers should strongly consider working with agents who are totally dedicated to ensuring that they get the best possible deal.
New York State law is crystal clear and requires disclosure regarding real estate agency relationships and the rights and obligations it creates.
As always, if you need legal, tax or other advice you should always consult with a professional in that field.
