The buying process in New York City is different than anywhere in the country. The vast majority of inventory consists of cooperative and condominium apartments with a smaller selection of private homes, which we call townhouses or brownstones. It is vital to understand the differences between them as there are certain requirements that may prohibit your ability of ownership. In New York City, using a buying specialist is free. Without one presents a significant disadvantage in negotiating and search efficiency resulting in loss of time and money. If you're seriously thinking of buying, don't waste a second more of your time. Get a free consultation from a local expert. There's no obligation and it would be foolish to say no to free information. I've saved my clients from overpaying thousands to hundreds of thousands of dollars on individual deals, reduced their closing costs, leveraged their purchasing power, educated them throughout the process, and introduced them to a team of professionals including designers, architects, contractors, mortgage bankers, movers, attorneys and more. There hasn't been a time where I haven't added value to my clients regardless of what industry they're in.
Want to take a bite out of the Big Apple? There are many reasons to consider homeownership over renting:
Property Appreciation: Historically, NYC has seen property values rise over time. Buying is a great way to let your money work for you.
Tax Write-Offs: Enjoy the ability to write off a portion of your monthly costs. As a primary or secondary residence, the interest payments of your loan (up to $750,000 of loan value), as well as the real estate tax that is apportioned to your apartment/home, may be able to be deducted to a limit. Please consult with your accountant about your eligibility.
Build Equity: As your property appreciates in value, you can use the equity you build to “trade up” to purchase a larger home, or simply amass greater savings.
Capital Improvements: Unlike a rental property, as you invest in the cosmetic or structural improvement of your home, it is directly correlated to increasing the value of the home itself.
Capital Gains Primary Residence Exclusion: If you purchase a primary residence and live there for more than 2 years, you can exclude up to $250,000 in capital gain from tax if you are single, and up to $500,000 for a couple.
1031 Exchange: A 1031 Exchange allows you to sell an investment property and reinvest in a like-kind replacement property within a period of time in order to defer taxes on recognition of capital gains and related federal income tax liability.
Step-by-Step Guide to Buying a Home
Create a Wish List Speak with your Buying Specialist about what you desire and require of a home and neighborhood. Defining the price range, size of apartment, location parameters, and building amenities will give your agent a good starting place for your search. Flexibility in any of these areas will broaden your options.
Select a Winning Team It is not only important to work with a Real Estate Agent whom you like and trust, but to select a full team of skilled professionals, including a New York City-based Real Estate Attorney and Mortgage Broker/Banker, who can help facilitate the process. Purchasing in New York City is highly specialized, so it is important to work with experts who can guide you through the intricacies with efficient communication.
Consult About Financing Whether working with a Mortgage Broker or Financial Institution directly, one of the most important steps in the purchase process is to meet with a professional to assess your finances and determine what you can afford and whether you should finance your purchase. Depending on your financial profile and purchase criteria there could be special financing programs saving you an incredible amount of money.
Fully Disclose Your Financials Your Buying Specialist will best guide you through this process once he or she is aware of your financial situation, specifically, your down payment, liquid assets after closing, debt and overall income. This will assist them in finding the best home to fit your parameters and help you spend your time as wisely as possible. There are building financial requirements you need to be aware of that can prohibit your ability to purchase especially in coop buildings. Coop boards will want to see strong employment history, 25% debt to income ratio (including your future carrying cost for the apartment), and 24x your future monthly payment in post-closing liquidity. These requirements vary per building. So, for example, let’s say you want to buy an apartment and your total monthly costs for mortgage and maintenance are $5,000/m. At the time of submitting the purchase application, the board will want to see you'll at least have $120k in liquid assets after you close. In addition, if the $5k would be your only debt you would need to show a minimum annual income of at least $215k to be safe (equates to about 29% DTI). If these aren’t met the majority of coops would deny the purchase. Keep in mind these requirements do not apply for condos. Lastly, coops generally require a 25% downpayment while condos have maximum financing flexibility (like putting down only 10%).
Plan Your Search Your Buying Specialist should have access to all available listings in New York City transmitted by the Real Estate Board of New York (REBNY) as well as other listings. Ask them to send you potential listings prior to making appointments and going to open houses. There is no need to seek the assistance of multiple agents as all members of REBNY have access to the same listings. I go the extra mile in planning out the most efficient schedule sorted by time and location to maximize my client's time.
Hit the Ground Running The best times to view properties are weekdays from 10am to 7pm, and on Sunday, when you can cover a lot of ground by visiting Open Houses scheduled throughout the day.
Make an Offer You’ve found it! The next step is to discuss submitting an offer through your Buying Specialist. An offer includes your preferences such as price, closing date and included/excluded personal property (light fixtures, etc.), as well as your qualifications as a buyer (i.e, current income, job description, net worth and debt status), and closing costs.
Due Diligence Once the seller accepts your offer, the seller’s attorney supplies your attorney with a Contract of Sale. In addition to the review of the language of the contract, your attorney will review the necessary/pertinent Condo/Co-op documents such as the Offering Plan, Building Financials, and Board Meeting Minutes. For a Townhouse, your attorney will review City documents.
Sign a Contract Upon satisfactory due diligence, you should be ready to sign your contract. Unlike most states, in New York, no monies are due until you are ready to sign when a 10% earnest deposit is usually due and held in escrow until closing. It is very important to note that until both parties sign a contract and it is delivered to the seller or seller’s attorney, a seller can accept another purchaser’s offer.
Apply for a Mortgage Upon signing your contract, immediately contact your mortgage broker/banker to help move the process along quickly. The loan process may take up to 45 days to complete and hinges on your ability to provide all the required financial documents to your broker/banker.
Complete Your Board Package While applying for your mortgage, your Buying Specialist will assist you with the completion of the Condo or Co-op board package. Your completed package must be returned to your agent within the time specified in your contract or 3 days from the date a bank commitment letter is received, whichever applies.
Ace the Board Interview If you are purchasing a co-op, meet with your Buying Specialist beforehand to prepare. The Board’s decision is customarily made known within 72 hours; however, some Boards may take longer. Upon board approval, notify your attorney who in turn will coordinate the closing date. This can take up to 2 weeks to schedule.
Inspect the Premises The day before or the morning of the closing, your Buying Specialist will accompany you to inspect the property. Make certain to check appliances, plumbing, and personal property has been removed and that the premises are in broom swept condition.
Close the Deal Within a few days of your closing date, your attorney will advise you on what certified monies to bring to the closing. Also be sure to bring your driver’s license or passport, and a checkbook.
Congratulations You’re a homeowner!
Comparing Condos, Co-ops and Townhouses
Types of Ownership
Cooperatives, or co-ops, comprise a significant portion of New York City’s real estate market. When purchasing a cooperative apartment, one purchases shares of stock in a corporation that owns the building and usually the land beneath. A stock certificate representing the purchased shares and a proprietary lease giving the right to occupy the apartment are conveyed at closing.
The size of the apartment and its amenities determine the number of allocated shares, which therefore determines the amount of maintenance. Maintenance fees cover the operating costs of the building such as upkeep of common areas, staff salaries, as well as payment of real estate taxes and interest on any underlying building mortgage.
A Board of Directors, whose duties are to conduct the business of the corporation and oversee the management company of the building, is elected from among the shareholders. Typically, the Board or an interview committee reviews the application of each prospective shareholder or lessee and presides over a personal interview prior to approving any purchase or lease. The Board has the right to approve or deny any applicant without cause.
Most co-ops require shareholders to occupy their apartments as primary residences; however, depending on the building, there may be an allowance for subletting. A prospective lessor is required to submit a formal application and personally interview with the Board for its approval. Duration varies from building to building, so be sure to ask your agent to confirm.
The ownership of a condominium apartment is similar to the ownership of real property. A purchaser of a condo takes title by deed for not only the apartment but also a percentage of the building’s common areas. Each owner pays property taxes to the city and common charges to the Board of Managers for their individual units. Real estate taxes may be deductible, however common charges are not.
The Board of Managers is elected by the condo residents to oversee building operations and enforcement of the “house rules.” The board uses the common charges to pay employees, as well as repair and improve the building.
Condominium transactions include a “right of first refusal” by the Board within 20-30 from receipt of a completed application.
By definition, a cond-op is a residential cooperative where the ground floor (typically commercial units) is converted into a separate condominium owned by either an outside investor or the original Sponsor of the building. Because the owner of the condo is not the owner of the co-op, the co-op does not receive the benefit from the condo income. Cooperatives that operate in the style of a Condominium are commonly yet inaccurately referred to as cond-ops.
Townhouse & House
A purchaser of a townhouse or house receives “fee simple” ownership of real property. The owner is responsible for payment of real estate taxes and common charges such as but not limited to water, electricity, gas, as well as insurance. The owner is also solely responsible for approving the sale or lease of the property. When owning your home, all equipment, repairs, and upkeep such as roof, heating/ cooling, windows, outdoor structures, hot water, electrical systems, video monitor and anti-theft systems are maintained by the homeowner, unless a property manager is hired. In addition to single-family townhomes, some properties are designated as multi-dwelling (i.e., 2-4 family) homes. Check with your attorney about the possibility of increasing or decreasing such designations. Keep in mind that homes that are larger than 4-family are considered a commercial purchase.
Brownstones & Townhouses are usually 4 to 6 stories and are either single-family homes or have been converted into multiple apartments (usually one per floor). Generally, these buildings offer a lot of charm with details such as wood moldings, fireplaces and outdoor space. They rarely have doormen.
Walk-up Buildings are no more than 6 stories and have no elevator and no doorman. They were originally constructed as multi-family housing. As one can imagine, the higher the floor – the less expensive the apartment.
Studios are one or two rooms that combine a living room and sleeping area. The kitchen may be within the same room or separate. An alcove studio (or L-Shaped) is a one or two-room studio with a separate alcove, which can be used as a sleeping area or “walled off” to form a bedroom. Please note that any alteration to the apartment should always be discussed with the landlord.
Pre-War Buildings are those built before World War II. These buildings tend to be less than twenty stories and are recognized for features such as larger rooms and/or windows, hardwood floors and high ceilings. These can be either doorman or non-doorman.
Post-War Buildings are generally larger than Pre- War, and were built between the 1950’s and 1970’s. Most will have doormen. Found on most city blocks, they tend to be constructed of white, red or brown brick.
Loft Apartments are usually large open spaces with high ceilings and big windows. They are predominantly located in the downtown neighborhoods and seldom have doormen.
Convertible (or flex) apartments have either an alcove that can be “walled off” to create an additional bedroom or when the living room is large enough to split, to make an additional bedroom while still retaining some of the living room space.
Junior 4 is a 1-bedroom with an alcove converted to a 2-bedroom.
Duplex or Triplex apartments consist of two or three floors respectively.
Loft Area or Mezzanine is an additional space created in apartments with very high ceilings. The loft area is usually constructed above the living room, accessible by a staircase or ladder and typically used for storage or sleeping.
Estimated Purchaser Closing Costs
New York City – All Residential Property Purchases
Verbals: Unlike many other markets, offers can be made orally to your Buying Specialist who then conveys the offer to the seller's agent. It is normal for the seller to make a counteroffer which will begin the negotiation process until there is a "meeting of the minds," at which point price, terms, and closing date have been agreed upon.
Board Package: The board package (also called purchase application) typically requires you to provide the following: bank statements, tax returns, loan documents, reference letters (personal, financial, and professional), verification of employment and supporting documents of your income & assets. This might seem invasive but it is the norm for New York. Your broker will then review the package and insert a cover letter, dividers, table of contents and make last-minute suggestions if need be before submission.
Before the new construction boom, coops used to make up 80% of the inventory in Manhattan. Coops are owned by an apartment corporation. The ownership structure is different than in a condo as you don't "own" your apartment as you would in the case of "real" property. In co-op apartments, you would actually own "shares" in the corporation which entitles you to a long-term "proprietary lease" (which is why owners can be referred to as "tenants"). The corporation pays the total amount of the building's expenses while the tenant (owner), in turn, pays a portion of these expenses as determined by the number of shares the tenant owns in the corporation. For example, a 2-bedroom 2-bath apartment in a coop building that has a maintenance of $3,000 would mean that the total monthly payment of $3,000 includes taxes and common charges. Seeing coops are not real property, a buyer gets to avoid a hefty mortgage tax which is nearly 2%.
The Board of Directors has the right to "approve" or "reject" any potential owner and is not required to give reason to any rejection. 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. Rejections are mostly due to financial requirements. Seeing the building is cooperation made up of shareholders, it is vital to have well-qualified owners. Think about it this way -- If an owner in a condo defaults on his loan or runs into any other type of problem, it affects the owner of that particular unit. Seeing there is no deed in a cooperative building if an owner were to default it would have an impact on the coop itself affecting all the owners.
COOP Financial Requirements: Generally speaking at the time of submitting the purchase application to the board they will want to see that you will have 24x the total monthly amount (mortgage + maintenance) after closing in liquid assets and they will want you to have a debt to income (DTI) ratio under 30%. This can vary per building as all boards will want your DTI to be below 30% however they can often prefer it to be 25%. Lastly, coops will want at least 25% down (unlike condos where you can put as little as 10% down and have no financial requirements).
So, for example, let’s say you want to buy a $1M apt. You put down $250k and your total monthly for mortgage and maintenance is $5,000/m. At the time of submitting the purchase app, the board will want to see you'll at least have $120k in liquid assets after you close. In addition, if the $5k would be your only debt you would need to show a minimum annual income of at least $215k to be safe (equates to about 29% DTI). If these aren’t met the majority of coops would deny the purchase.
Keep in mind some buildings accept gifts which you can use for the downpayment.
Monthlies: Portions of your 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.
Sublet Policy: Whenever you want to sublet (rent) your apartment it must be approved by the Board first. Every building has its own rules but most require you to live in the apartment 2yrs before renting and have a maximum time period the unit can be rented.
Pets: are hit and miss. The majority nowadays allow them but there are still a lot of buildings out there that do not allow dogs.
Important: Lastly (and very importantly) coops can have actual mortgages on the building itself.
Condos used to make up only about 20% of the inventory in Manhattan before the recent big construction boom (now its about 45%). You get a deed just as if you were buying a house. Since a condo is real property, there is a separate tax lot for each unit. This means you pay your own real estate taxes for the property and common charges. A condominium building, by law, cannot have an underlying mortgage so you don't need to worry about that as you do in a coop.
Just as in coops, typically an extensive purchase application is required which discloses financials and requires reference letters. Majority of all condo buildings do not require a board interview. The length of time for approval varies from building to building. Consider the package more of a formality.
Condos are much more lenient in their subletting policy. Typically an owner can lease immediately with no maximum time limit. The minimum lease period can vary but most require at least a 1yr term. Yes, you guessed it, this makes condos much more investor-friendly.
If you are a non-U.S. citizen or have assets held outside of the United States condos are the ideal choice. Co-ops are unlikely to approve a buyer whose funds are not in the U.S.
There are both pros and cons between condos and coops. Seeing condos allow for more flexibility, generally newer, and oftentimes lower monthly costs, they will be higher in price. Coops have lower closing costs and less liquid considering the restrictions. NYC is a market like no other with its unique levels of ownership, prices and fast pace. There is no cost for a buyer to use a buying agent. Seeing the complexity of the process and that the majority of all sellers hire a real estate professional to negotiate the best deal on their behalf it is highly recommended to obtain a buying specialist.
If you would like more information on the process or would like for me to represent you as your buying agent, click HERE
Being one of the top real estate agents in Manhattan with Halstead and founder of Elite Realty, a Florida real estate brokerage, Michael specializes in both sales and luxury rentals with a vast network. His extensive knowledge of the real estate market contributes to his edge in negotiation and expertise in pricing.
"People want value and that's exactly what I give them. If it was as easy as online advertising everyone would have the same success rate. I have the ability to identify potential buyers and market my listings to their specific demographics, interests, and neighborhoods. I'm very active in the market and have built relationships throughout the industry that are invaluable, especially to a seller. I save buyers tons of time and stress, as I know the ins and outs of the sale process and can provide tremendous insight regarding current and upcoming inventory."
From guiding first time home buyers and foreign investors to exceeding the expectations of his sellers, Michael works around the clock to assure a smooth and successful transaction. "My clients are not just getting me but a unique team of real estate professionals with a powerful brand behind us. We're essentially a one-stop shop, scouring the market for our investors, even helping to source capital for our developers."
In addition to brokering real estate deals in two states, Michael is a co-developer and the head of sales & marketing for a ground-up condominium development in Sarasota called The Beacon.
Outside of real estate, Michael is a fitness enthusiast, a huge foodie, and takes great pleasure in serving his community. He is the board chair of Dorill Initiative, a multidisciplinary arts nonprofit organization based out of NYC who is committed to empowering youth to tell their stories and transform communities through literary, visual, and performing arts education.
"I've been involved in many real estate transactions throughout the years and dealt with dozens and dozens of real estate agents. Michael Holt is one of the very best agents I've ever dealt with. I would deal with him again in the future and I intend to do so in my next New York transaction. Michael's work is highly recommended!" Robert R., Writer
"Michael was ethical, diligent, and very attentive to my needs and was available all the time. I have been involved with many real estate acquisitions and sales in the past 12 years in NYC and Michael Holt is one of the best persons I have ever worked with." Dr. Harrison C.
"We flew in from Los Angeles, and with Michael's help in navigating through NYC real estate market, we found a condo to purchase within 4 days. Michael also helped us find a reputable NYC real estate attorney to help us with the transaction. Michael was very responsive to our questions and very knowledgeable of the NYC real estate market. We closed the deal and the condo apartment was ours within 40 days. I highly recommend Michael Holt!" Lan S.
"Michael was fantastic in representing us on both purchase and sale side. We appreciated his honesty, integrity, and professionalism. Michael was extremely responsive and was a pleasure to work with.
The Levine Family
Michael was responsive, reliable and knowledgeable. He handled all the details while keeping me informed, which was exactly what I was looking for. I could not have done this without Michael, his help and hard work were very much appreciated." - Elana B., Google Account Executive