FOR BUYERS

For Buyers

Thinking about buying?

Finding a place to call home is certainly every home buyers first priority. Once the property is identified then a multitude of questions and concerns arise which should be addressed immediately.

All our buyers share some key concerns.

1. Overpaying – signals bank undervaluation concern, and overarching concern of paying too much.

2. Stability of Investment – a concern over value and if the building financials such as reserves and operating income and expenses are likely to remain in good standing.

It has been our experience that real estate transactions are successful only if the two key concerns are put to rest.

Essential 5 Items Buyers Need to Prepare

Net Worth and Income Statement – a document that lists Assets (like bank/investment/retirement account balances), Liabilities (credit card/loan balances etc.) and annual income of each applicant. Section of our Offer Form provides fields for the Net Worth and Income Statement as well.
Most Recent 2 Years Tax Returns – most board packages require tax returns
Most Recent 2 Years W2’s and Most Recent 30 Days Pay Stubs – applicable only if you are employed by a company, self employed individuals must only provide tax returns.
Most Recent 3 Months Bank, Investment and Retirement Account Statements – a buyer is not required to disclose all assets to the lender or the coop, but the down payment and required reserves must be sourced by an account statement.
Valid form of Picture ID – Current Passports, Drivers License, State issues ID’s are considered valid forms of identification.
NOT REQUIRED ON SUBMISSION but can prove to be very helpful in the buying process is a current copy of Credit Report.

The Buying Process – 6 Steps Every Buyer Must Understand

There is usually a total of 6 steps that a buyer must take in order to successfully complete a coop transaction.

1. Contract
Once an initial agreement has been reached between a buyer and the seller, a summation of the transaction and the parties involved called the “Deal Sheet” or a “Transaction Summary” is sent to all respective attorneys, brokers and principals involved. The seller’s attorney drafts a contract and sends it along with the building’s offering plan to the buyer’s attorney. The buyer’s attorney conducts due diligence on the building, negotiates some key contractual points to protect his client, and if all is well advises the buyer to sign the contract. The contract along with down-payment check, or wire transfer, is then sent to the seller’s attorney. The seller’s attorney deposits the down payment into an escrow account, then advises seller to sign. Once the sellers sign, a copy is then delivered back to the buyer’s attorney. Once the buyer’s attorney receives the contract it becomes binding, and the rest of the transaction can proceed.

2. Bank Loan (Mortgage)
Considering bank financing is being used, the buyer must apply for a mortgage loan (by submitting financials and authorizing credit check) as soon as the contract is signed. The bank will then appraise the property, approve the building based on the building’s financials, questionnaire and verification of insurance, then ultimately issue a letter of “Commitment” to fund the loan.

3. Board Approval
In most cases where board approval of the buyer is also required, the buyer must submit an application for the board’s approval in order to buy into the building. The application is usually provided by the building’s management and must be fully completed as specified in the application cover letter then submitted to the board for review. Most boards in addition to reviewing the buyer’s application have a policy to interview the buyer. It is scheduled shortly after the board members have been able to review the buyer’s application. Once the board issues official approval, the transaction can proceed to closing.

Bonus Tip: Board Application often calls for Recommendation Letters. Here is a Link to an Article Containing Sample Letters

4. Scheduling Closing
Once the clearance to close is given by the board there are many final details that get addressed by the lender, the attorneys, the brokers, lean holding bank, building’s attorney and building management. Then ultimately a date is chosen based on the availability of all the parties involved. NOTE: in most closings there are FIVE attorneys present (Buyer’s Attorney, Seller’s Attorney, Building’s Attorney, Buyer’s Bank Attorney who brings the money and documents to closing, Lean Holding Bank’s Attorney who comes to collect a payoff check and release the lean) then there are the main people involved, the Buyer and the Seller. The buyer’s attorney informs the buyer as to what checks and/or documents to bring to the closing.

5. Final Walk Through
Withing 24hrs of closing the Buyers must do a walk through of the property to make sure it is being transferred in the condition specified in the contract of sale.

6. Closing
Closing entails sitting at a large table with all the attorneys present and signing a lot of documents with the guidance of your attorney. Then in the end keys (possession) transfers hands and the property officially belongs to the buyer.

NYC Coop Closing Costs Explained

The key to understanding coops is to understand that the building itself is a registered corporation that sells shares of ownership to individual unit owners, and the amount of shares are appropriated to each unit based on square footage.

Coop loans since their inception were booked by banks as Business Loans. Leans were filed through Uniformed Commercial Code, much like a lean on any corporation that borrowed money from a bank. Even though secondary mortgage markets now recognize coop loans as home mortgages, the lending principals for coops remained the same, therefore making them exempt from many insurance and tax requirements.

An average buyer’s coop closing costs break down as follows:

Buyer’s Attorney: $2,000
Coop’s Transfer Agent: $750
Credit Check: $100

If using a Mortgage add:

Application Fee: $650
Appraisal fee: $375-750 depending on property size
Bank’s Attorney: $750
Recognition Agreement Preparation: $100
UCC Lean Filing Fee: $150
Lean Searches: $300

NOTE: any property sold in the city of NY over $1 million dollars is subject to Mansion Tax. Be sure to factor it into your budget if your purchase price exceeds $1 million. Additionally any discount points you CHOOSE to pay your lender in effort to reduce your effective borrowing rate will add to the overall expense. Fees vary from one lender to the next. Be sure to request a Good Faith Estimate from your lender to get and understanding of their fees.

NYC Condominium Closing Costs Explained

Condominiums are common real property. The title to the property is transferred from one owner to the next by the use of a document known as The Deed. The title must be “Marketable” meaning free of any leans or judgments and requires to be insured by a title company to protect against unknown encumbrances.

Typical Condominium or Townhouse closing costs are as follows:

Buyer’s Attorney: $2,000
Management Fees: $1,200

If using a Mortgage add:

Application Fee: $650
Appraisal fee: $375-750 depending on property size and value
Bank’s Attorney: $750
Recording Fees: $430
Title Search: $300

Title Insurance: approximately 0.5% of the purchase price
NY City and State Mortgage Recording Tax: just under 2% of the loan amount

This estimate is the bulk of costs you can anticipate when purchasing a condominium in NYC.