Guide for Buyers
Assembling Your Team
real estate broker
Provides a market/neighborhood analysis and a comparison of on-market, in contract and sold properties
Negotiate the purchase and terms of the deal
Prepare a strong purchase application to help the board approval process run smoothly
Knowledgeable on due diligence and litigation processes
Offer guidance on co-op board interview (if needed)
Conduct walk-thru of the apartment prior to closing
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.
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 (process begins once contract of sale is fully executed)
commitment to lend subject to
Appraisal of property
Title
Project Approval
Purchase/personal financial 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.
Document Preparation
These documents will be presented to the seller or seller’s agent in an offer and will prove to the seller the buyer is ready, serious, and qualified to purchase 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 should 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
Fees & Closing Costs
Cooperatives vs. Condominium
COOPERATIVE
Ownership: Purchasing shares of stock & a proprietary lease
Application process: Requires board review of application and interview of purchaser
Approval: Can accept or reject purchaser without giving reason
Fees: Maintenance Fee - includes utilities, building insurance, property tax and staff salaries
Downpayment & finances after purchase: Variable & building specific - sometimes financing not permitted
CONDOMINIUM
Ownership: Own the real estate comprising your apartment
Application process: Requires board review of application
Approval: Have right of first refusal: The condo board can review purchaser but cannot reject without exercising right of first refusal to purchase the apartment
Fees:
Common Charges: Building operating cost, management fees
Real Estate Taxes: Taxes levied on apartment
Downpayment & finances after purchase: Most require 10% down payment and proof of funds to purchase
Terms & 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. These projects are for the common good of the building whether it be hallways, lobbies, roofs, mechanical systems, water or even the building façade work.
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’re subletting to a renter because you have a proprietary lease with the co-op.
