Yaghouti Rohrberg Team

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Most of the content on the following pages has been taken from REBNY or adapted from and is subject to change.

 

BEFORE YOU BEGIN THE BUYING PROCESS

The New York real estate market moves fast and requires buyers to be well prepared. The below is meant to provide a snapshot of how best to prepare for the buying process. For more complete details, please read through the remainder of this brochure.

 

1. Prepare your documentation.

To ensure a smooth process, it is important to have the following on hand BEFORE commencing the buying process:

• Mortgage pre-qualification. If applicable, obtain a pre-approval letter from your mortgage bank or broker

• Tax returns for the past two years.

• Bank statements. Usually the two last month statements of your checking and saving accounts.

• List of other liquid and non liquid assets which may include items such as stocks, bonds, retirement funds, and real estate investments

• Employment verification letter including starting date and annual income. If you are self-employed, request a letter from your CPA or attorney verifying your salary.

• Personal and professional reference letters.

• Credit history (if applicable). If you have a credit history in the US, review your credit report and determine whether there are any outstanding debts to be cleared.

 

2. Select a New York City attorney and an accountant (if applicable).

Should you need them, our referral sheet provides several attorney and mortgage broker references.

 

3. Determine what is important in your search.

Ensure that your real estate agent understands what you are looking for:

  • investment vs. primary residence
  • type of apartment and/or building
  • budget
  • time frame
  • Once your criteria are determined, your agent will be able to start an effective search and show you some properties meeting your requirements.

 

1 THE BUYING PROCESS

The buying process in New York City is a complex series of events. Under normal circumstances,a closing can take anywhere from four to twelve weeks. The process will differ based on the type of unit you are purchasing:

  • condominium closing unless he/she is paying cash, the purchaser must first obtain a loan commitment. Then the seller must receive a Waiver of the Right of First Refusal from the Condominium Association's board.
  • co-op closing following a personal interview, the purchaser must obtain a loan commitment and approval of the sale by the co-op's Board of Directors.

OBTAINING A LOAN*

Before starting your search, your broker can put you in touch with a mortgage broker or lender to determine your qualifications and help you obtain a loan. You can apply for a loan directly through a lender (e.g. a bank) or use the services of a mortgage broker.

*Refer to “Before You Begin the Buying Process” for full details on the information you will need to have on hand.

 

THE OFFER TO PURCHASE

Once you have determined the apartment you want to purchase, your broker will help you negotiate an accepted offer, which should include:

  • the price you will pay
  • % of the price you will finance
  • any inclusions or exclusions of personal property
  • your desired closing date

Reminder: You do not have a deal until a contract is signed by and delivered to both parties.

HIRING AN ATTORNEY

New York City has complex real estate laws. Your broker can assist you in hiring a local real estate attorney. Prior to signing a contract, the lawyer will perform a "due diligence" review of the underlying documents for a co-op or condo to determine whether the building faces any legal or financial problems. The review will differ based on the type of unit:

  • condominium offering plan, amendments, by-laws, house rules, financial statements and title report.
  • co-op offering plan, amendments, by-laws, house rules, financial statements and proprietary lease. In addition, the attorney should review the corporate minutes of the cooperative at the managing agent's office. Reviewing the minutes will provide insight into any current or future building problems and reveal if there are major expenses to be incurred by the co-op corporation and its shareholders.

 

2 THE CONTRACT OF SALE

Once an offer has been accepted the seller’s real estate attorney will prepare the contract of sale and forward it to your real estate attorney. At this point, you should inform your attorney of any particular terms of the transaction or special circumstances. The attorney will make any changes or additions to the contract necessary to protect your interests.

Upon contract finalization, the lawyer should meet with you to explain your rights and obligations under the terms of the contract. You will sign multiple copies of the contract and provide a bank check representing the down payment (usually 10%-20% of the purchase price). The contracts and the down payment check are then delivered to the seller’s attorney. The sellers’ attorney will hold the down payment in his trust/escrow account until closing.

Thereafter the seller countersigns the contract, the seller’s attorney signs it acknowledging receipt of the down payment and two fully executed copies are returned to your attorney. Your attorney will deliver one original contract to you and a copy to your lender or mortgage broker.

If you have not already done so, promptly submit your final mortgage application upon receiving the signed contract.

 

THE MORTGAGE BROKER

Residential mortgage brokers are regulated by the New York State Banking Department. Mortgage brokers negotiate, originate and process residential real estate loans on behalf of the borrower. A mortgage broker does not actually lend money to prospective purchasers. Instead, he/she arranges for a loan through an institutional lender on behalf of the purchaser. A lender's decision to make a loan is usually based upon the following factors:

  • credit rating
  • income, liquid assets and liabilities
  • requested loan amount
  • appraised value of the apartment
  • to verify this information, the lender will:
  • require a loan application setting forth your assets and liabilities
  • confirm your employment and income
  • request a credit report from a credit reporting agency
  • have the apartment appraised.

When obtaining a loan, the mortgage broker/lender will need to ensure the building is in good financial condition. As such, it is a good idea to obtain the building's financial statements for the last two years. Bear in mind, it normally takes three to six weeks to obtain written loan commitment. A “commitment” is the lender’s written agreement to lend money to buy the apartment. Once the loan commitment has been issued, your attorney should review it. If everything is in order, sign the commitment and return it to the lender or mortgage broker as directed.

 

  BOARD APPROVAL

co-op

Unless you are purchasing directly from the sponsor, the sale of a co-op is subject to co-op board approval. The contract provides that you promptly submit your application for board approval after issuance of a financing commitment, if any. You must cooperate with co-op board requests, providing any documentation required to approve your purchase. This is often referred to as a board package. Each co-op board establishes the financial requirements for prospective purchasers in their building. In addition, co-op boards set financial limitations on the amount of money a prospective purchaser may borrow in order to conclude the transaction. (e.g., many co-ops only allow a 50%-75% financing of the purchase price.)

condominium

Unless you are purchasing directly from the developer, the sale of a condominium is conditional upon the Board of Managers’ Waiver of the Right of First Refusal approving the purchaser. Your purchase contract provides that you promptly submit your application for board approval after issuance of a financing commitment, if any. You must cooperate with the condo board requests and provide any documentation required to issue the waiver.

 

THE CLOSING

co-op

The closing is generally held at the office of the Managing Agent for the apartment corporation. It is attended by you, your attorney, the seller, the seller's attorney, the lender's attorney, a representative from the managing agent's office and the real estate agents involved. At the closing, you will first sign all the documents necessary to secure interest in the apartment. These documents include a Security Agreement, Promissory Note, a Stock Power and an Assignment of Lease. You will then sign and receive all documents to convey the co-op apartment to you, including stock certificates, the proprietary lease and consent. Checks, representing the balance of the purchase price and adjustments, are exchanged for the keys.

condominium

The closing is ordinarily held at the office of the lender's attorney unless it is a developer sale; in which case it is held at the developer's attorney's office. The condo closing is attended by:

  • the buyer
  • the buyer’s attorney
  • the seller
  • the seller's attorney
  • the lender's attorney
  • the title company closer
  • the real estate agents involved

At the closing, you will first sign all documents necessary to put a first mortgage on the apartment (e.g. a Mortgage and a Promissory Note) You will then sign and receive all documents to convey the residence to you (e.g. a deed, title report and unit power of attorney). Checks representing the balance of the purchase price and adjustments are exchanged for the keys and you pay all appropriate taxes and title charges.

 

CLOSING COST ESTIMATES

Condominium Apartments & Townhouses

FOR THE SELLER

Broker Commission: Set by broker

Seller’s Attorney: $1,250 and up

Managing Agent Processing Fee: $450—$750

Move-out Deposit: $500—$1,000

New York City Transfer Tax: 1% of purchase price of $500,000.00 or less 1.425% of purchase price over $500,000 (paid by Seller, except in sale by Sponsor)

New York State Transfer Tax: 0.4% of price (paid by Seller, except in sale by Sponsor)

Misc. Title & Recording Fees: $100

Mortgage Satisfaction Fee: $150—$300

FOR THE PURCHASER

Purchaser’s Attorney: $1,500 and up (depending on purchase price)

Bank Fees:

Points: 0 to 3% of loan amount

Application, credit check, etc.: $500

Bank Attorney: $450—$750

Short Term Interest: Up to one month

Tax Escrows: 2 to 6 months

Recording Fees: $150

Mortgage Tax: 2% of mortgage on loans under $500,000 2.125% of mortgage on loans $500,000.00 and over

Title Insurance Rates: Vary by NY law as insurance increases

Violation Search: $250

Managing Agent Fee: $250

Common Charge Adjustment: Up to one month

Real Estate Tax Adjustment: 1 to 5 months

Mansion Tax: 1% of price of $1,000,000 or more

Title Closer Fee: $100—$150

*Please note that these are only estimates meant to give you a base understanding of costs encountered in closing. Actual costs may vary.

 

Cooperative Apartments

FOR THE SELLER

Broker Commission: Set by broker

Seller’s Attorney: $1,250 and up

Co-op Attorney/Managing Agent : $400—800

Flip Tax: Varies by building, if any

Stock Transfer Tax: $0.05 per share

Move-out Deposit: $500—$1,000

New York City Transfer Tax: 1% of purchase price of $500,000.00 or less 1.425% of purchase price over $500,000 (paid by Seller Seller, except in sale by Sponsor)

Transfer Tax Filing Fee: $25 recording fee

New York State Transfer Tax: 0.4% of price (paid by Seller, except sale by Sponsor)

Payoff Bank Attorney: $300

UCC-3 Filing Fee: $25

FOR THE PURCHASER

Purchaser’s Attorney: $1,250 and up

Bank Fees:

Points: 0 to 3% of loan amount

Application, credit check, etc.: Approximately $500

Bank Attorney: Approximately $450 -$800

UCC-I Filing: $75

Short Term Interest: Up to one month

Move-in Deposit: $500—$1,000

Recognition Agreement Fee: $250

Lien Search: $250

Maintenance Adjustment: Up to one Month

Mansion Tax: 1% of price of $1,000,000 or more

*Please note that these are only estimates meant to give you a base understanding of costs encountered in closing. Actual costs may vary.*

 

CO-OP VS. CONDO

WHAT IS A CO-OP?

85% of all apartments available for purchase (and almost 100% of pre-war apartments) in New York City are in co-operative buildings. When you buy a co-op, you don’t actually own your apartment. Instead, you buy shares of a co-op corporation that owns the building. The larger your apartment, the more shares within the corporation you own. Monthly maintenance fees cover building expenses including heat, hot water, insurance, staff salaries, and real estate taxes.

Advantages of Buying a Co-op

  • Co-ops are generally less expensive than comparable condominium apartments.
  • Some of the monthly maintenance fees are tax deductible.

Disadvantages of Buying a Co-op

  • All prospective purchasers must be approved by the Board of Directors.
  • The Board approval process is often time-consuming and rigorous—requiring extensive information regarding finances, employment, and personal background. Even celebrities have been turned down by some selective New York co-op boards.
  • Monthly maintenance fees for co-ops are much higher than those of condos. This is because the monthly fee includes part of the underlying mortgage for the building.
  • Many co-op boards limit the purchase price amount that can be financed and require higher down payments than are usually required for condominiums.
  • It is harder to sub-lease a co-op. Each co-op building has its own rules, but many limit or forbid subletting.

WHAT IS A CONDOMINIUM?

As new residential buildings are constructed, condominiums are becoming more popular in New York City. Unlike co-ops, condo apartments are "real" properties. Buying a condo is much like buying a house. Each individual unit has its own deed and tax bill. Condos offer greater flexibility, but are often priced higher than comparable co-op apartments.

Advantages

  • In most cases, buyers can finance a larger portion of the purchase price (up to 90%) and
  • Put less money down.
  • You don’t have to deal with board approval.
  • Can be freely sublet, giving you more flexibility—though many implement a minimum length of stay restriction (e.g. one month, six months, one year)
  • Monthly maintenance fees are much lower than those of co-ops.

Disadvantages

  • Condos are generally more expensive than comparable co-op apartments.
  • Monthly maintenance payments are not tax-deductible.
  • Fewer condos available in the New York City real estate market, limiting your options.

 

 

GLOSSARY

Agency disclosure form: The Department of State has released the new Agency Disclosure Forms, which is now required to use in connection with all residential real estate transactions (including co-ops and condominiums). The new forms allow for advanced informed consent to Dual Agency; permitting consumers to give their advanced consent to dual agency representation.

Amendment: An amendment is used to make changes to a previously signed contract by editing and replacing contract clauses, and has general boilerplate for an amendment.

Appraisal: An estimate of the monetary value of a property on the open market.

Appraiser: An independent person trained to provide an unbiased estimate of value, such as a professional service performed for a fee.

“As is”: Words in a contract intended to signify that no guarantees, whatsoever, are given regarding the subject property and that it is being purchased exactly as it is found. An "as-is" indicator is intended to be a disclaimer of warranties or representations.

Assessment: The imposition of a tax, charge or lien, usually according to established rates.

Board: Both New York City condominiums and co-op buildings can have a Board, which is essentially a governing body of fellow condo tenants or co-op shareholders, elected by the other tenants or shareholders. In both case, the Board's duties include overseeing the maintenance, financing, and staffing of, as well as improvements to, such common areas as hallways, storage and laundry facilities, elevators, heating systems, stairwells, lobbies, and the building's exterior.

Board interview: The interview process is designed to test the suitability of a candidate in a way that cannot be measured on a written exam.

Board package: A Board Package details your complete financial history and current worth and earnings, with supporting documentation, and includes your job and salary history, investment portfolios, personal and professional recommendations, tax returns and credit reports, and more.

By-Laws: The official rules and regulations which govern a corporation’s management. Drawn up at the time of incorporation, along with the charter.

Closing cost: Expenses of the sale (or loan refinancing) that must be paid in addition to the purchase price (in the case of the buyer’s expenses) or be deducted from the proceeds of the sale (in the case of the seller’s expenses). Some closing costs result from legal requirements; others are a matter of local custom and practice.

Condominium: please refer to co-op vs. condo worksheet

Cond-ops: This term is usually used to describe a co-op that operates under condominium rules. This is most important to the investor who is concerned about strict rental rules in co-ops.

Contingency: A provision in a contract that requires a certain act to be done or a certain event to occur before the contract becomes binding.

Contingency Clause: A contingency clause, in the context of real estate, refers to conditions attached to an offer to purchase property and included in the real estate contract which must be met in order to make the purchase offer binding on the buyer.

Co-op: please refer to co-op vs. condo worksheet

Deed: A written instrument, when executed and delivered, conveys title to or an interest in real estate.

Down payment: A portion of the price of a home, usually between 10-20%, not borrowed and paid up front in cash.

Escrow Account: Something of value, such as a deed, stock, money, or written instrument, that is put into the custody of a third person by its owner, a grantor, an obligor, or a promisor, to be retained until the occurrence of a contingency or performance of a condition.

Homeowner’s Insurance: is the type of property insurance that covers private homes. It is an insurance policy that combines various personal insurance protections, which can include losses occurring to one’s home, its contents, loss of its use (additional living expenses), or loss of other personal possessions of the homeowner, as well as liability insurance for accidents that may happen at the home or at the hands of the homeowner within the policy territory. It requires that at least one of the named insureds occupies the home.

Loan Commitment: A lender’s agreement to lend a specified amount of money which must be exercised within a set time limit.

Mansion Tax: 1% of the selling price. It is a state Tax paid by the buyer, only when the selling price exceeds $1,000,000.

Maintenance: Monthly or annual charges assessed in a condominium, planned united development, or cooperative development to cover operational costs.

Minutes: also known as protocols, are the instant written record of a meeting or hearing. They typically describe the events of the meeting, starting with a list of attendees, a statement of the issues considered by the participants, and related responses or decisions for the issues.

Offering Plan: Offering Plan or Prospectus includes the basic content and format of the By-Laws, Proprietary Lease and House Rules of a property.

Ownership: The right to use, possess, enjoy, transfer, and dispose of a thing to the exclusion of all others.

Power of Attorney: or letter of attorney is a written authorization to represent or act on another’s behalf in private affairs, business, or some other legal matter.11

Pre-approval: A lender commits to lend to a potential borrower a fixed loan amount based on a completed loan application, credit reports, debt, savings and has been reviewed by an underwriter. The commitment remains as long as the borrower still meets the qualification requirements at the time of purchase. This does not guaranty a loan until the property has passed inspections underwriting guidelines.

Real Estate Taxes: Real estate taxes in the U.S. are usually assessed at the municipal level and are a vital part of municipal budgets. Revenue from real Estate taxes are used to fund things such as schools, hospitals, infrastructure and so on.

Real Estate Transfer Tax: State or local tax payable when title passes from one owner to another. Paid by seller, except most sponsor sales.

Right of First Refusal: A provision in an agreement that requires the owner of a property to give another party the first opportunity to purchase or lease the property before he or she offers it for sale or lease to others.

Share holders: Individual or institution (including a corporation) that legally owns one or more shares of stock in a public or private corporation

Tax Abatement: The Cooperative and Condominium Tax Abatement Program gives partial tax relief to owners and tenant-shareholders of Residential Class 2 properties. This is because Class 1 properties (i.e., one-, two-, and three-family homes), are assessed at a lower percentage of market value than Class 2.

Title: The right to or ownership of land. The evidence of ownership of land.

Title Insurance: A comprehensive indemnity contract under which a title insurance company warrants to make good a loss arising through defects in title to real estate or any liens or encumbrances thereon. Unlike other types of insurance, which protect a policyholder against loss from some future occurrence (such as a fire or auto accident), title insurance in effect protects a policyholder against loss from some occurrence that has already happened, such as a forged deed somewhere in the chain of title.

Transfer taxes: A state tax imposed on the transfer or conveyance of realty or any realty interest by means of deed, lease, sublease, assignment, contract for deed or similar instrument. One purpose of the tax is to acquire reliable data on the fair market value of the property to help establish more accurate real property tax assessments.

 

BUILDING AND APARTMENT TERMINOLOGY

BUILDING

Luxury doorman buildings

Usually refers to new construction or apartment buildings that were built within the past twenty years or so. These buildings tend to be condominiums, typically stand twenty to forty or more stories tall and provide concierge services. Many have health clubs and/or swimming pools.

 

Pre-war buildings

By definition, a building built before World War II. These buildings are usually ten to twenty stories tall and are sought after for their larger rooms, fireplaces, hardwood floors and higher ceilings. They may or may not provide a doorman.

 

Post-war buildings

These buildings were built between the late 1940s and the late 1970s. They are generally hi-rise and most have doormen.

 

Elevator buildings

This term usually describes a 6 to 20 stories tall non-doorman building which may be pre-war or post-war. Elevator buildings usually have an intercom or video security system.

 

Walk-up buildings

This is the least expensive type of housing in New York City and the quality can vary widely. Usually these are 4 to 5 story buildings with no doorman and no elevator. They were originally constructed as multi-family dwellings and do not exude the charm or elegance of brownstones or town homes.

 

Brownstone or Townhouse

Four to six story buildings built in the 1800s to early 1900s. These can be single family houses or may have been converted over the years into multiple apartments. They are prized for their charm and elegance. In almost all cases these buildings do not have a doorman.

 

Loft buildings

Former commercial or industrial buildings that have been converted into apartments. These buildings almost never provide a doorman and usually consist of vast spaces with high ceilings.

 

APARTMENT

Studio

One or two rooms with combined living and sleeping areas.

 

Alcove studio

A one or two room apartment with a separate alcove which can be used as a sleeping or dining area. Alcoves usually adjoin the living room space of the apartment, are generally less than 100 sq. feet and can sometimes be walled off to create an additional bedroom.

 

Junior

An apartment with an alcove off of the living room that has been converted into a bedroom or dining room. For example, a Junior 4 would be a three room apartment, (living room, kitchen and bedroom), which has four rooms by using the alcove space to create an additional room.

 

Convertible

This is typically an apartment with an alcove adjacent to the living room that can be used to create another room by using this “flexible” space to “convert” the apartment from, for example, a one bedroom to a two bedroom.

 

Classic

The word “classic” is usually followed by a number indicating the number of rooms in an apartment. It is usually associated with pre-war apartments that meet criteria for numbers of rooms and design. However, a “classic” can exist in a post-war building assuming it follows the same guidelines. As an example, a “classic six “ is comprised of a living room, dining room, kitchen, two bedrooms and a maid’s room. A “classic seven” is comprised of a living room, dining room, kitchen, three bedrooms and a maid’s room.

 

Loft area

This is an additional space created in apartments with very high ceilings. The loft area is constructed above the living area, accessed via a staircase or ladder and used for extra storage, sleeping or living space (e.g. an office.)

 

Duplex

In Manhattan this refers to an apartment with two floors or on two levels and not to two apartment units. 

Thanks To

JOOMLA

JOOMLART

Luis Villamarin

Mo.Y.