PURCHASE PROCESS

The first thing to understand for any buyer, it is that there two main type of property that can be owned: condomiums and coops. You can also find some tonhouses, which are  3 to 5 stories buildgs, that can be owned by one owner only.

 

 

Buying a real property: Condominiums

 

Owning a condominium, or condo, is pretty similar from being the owner of an apartment in Paris, Dublin. At closing, you will own a real  property in exchange of an amount of money, and a deed will be conveyed at this time, and will be recorded on the public record. You will also own a percentage of the common area of the building, like the rest of the owners. The Building is usually managed by a Codo Board, to which you pay monthly common charges. And each owner has to pay the real estate tax (some condo buildings can benefit a Tax Abatment program).

 

Condos are common in most of the US cities, but in manhattan, they represent only 25% of all the properties.While condominiums are quite common throughout the country, they are a rather new concept for New York City.

 

 

Pros and cons of condos :

 

Pros:

 

- Flexibility. Most an owner’s decision are not depending on an approval that would be hard to obtain. You can usually rent out the unit, resell it, keep it, let your family members or friends use it, etc. It is also easier to get a mortgage from a bank, as long as the financing market allows this. Nowadays, US citizens with good credit scores can still hope to get an  80% financing with good rates from banks.

 

- application to the Board. Most of the time, a prospective buyer will have to apply to the board and follow a process, to file an “application package”, and he is often asked to disclose some financial information. The board will check the credit history, the criminal background, etc. A minor application fee is asked at this time. Depending on each building, the process can be more or less fast, and require more or less documents from the purchaser.

 

- for those reasons, condos are not only preferred by foreign buyers, but also by New Yorkers that do not know what the future will be made of, and want to have some flexibility along the way. Some buyers will also choose this type of property to avoid to disclose too many financial information, assets, or to provide with reference letters, like it can often be asked when applying for a coop.Foreign buyers application being often declined by ccop board as they are synonymous of turn over, disturbance, no guaranty on the assets to pay the maintenance charges, etc., condos are the main way for them to own real estate in the City.

 

 

Cons:

 

Because of this preference by more more and buyers, and the very little inventory, and the fact that this is almost the only market foreign buyers can invest into, prices are often 15 to 20 % higher than in coops. You also pay the price for having the flexibility to resell at will.

 

 

 

Co-operative Buildings or “Co-ops”

Coops have been the most common way to own an apartment for a long period of time. This explains why 75% of the apartments in NYC are co-ops, vs condos. It is important for the buyer to understand when he buys a co-op, he is buying shares in an entity that is an apartment corporation, the shares are being owned by the “owners” or shareholders of a building. In exchange of owning those shares, the shareholder has a “proprietary lease”. This explains why decisions have to be made by a Board each time it affects the community in the building, or the property itself (a new buyer, the decision to rent out, a new tenant, reselling, etc.).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 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.While some can be scared by all the restrictions that go with co-ops, there are also positive aspects.

 

Pros:

 

- prices are often lower than equivalent units in condo buildings.

 

- More choices are available. Co-ops represent 75% of all the apartments.

 

- 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.

 

Cons

 

-       Lack of flexibility. The board can approve, or reject an applicant (buyer or sub-tenant have to be interviewed and show proofs of asset, history, etc.). The board is responsible for protecting the interest of all shareholders.

 

-       Board approval for all decision regarding the apartment: buying, selling, renting, remodeling, …

 

 

 

Steps to Purchasing an Apartment

 

Once you contact our team of consultant, letting us know what is your project about, our mission to find you the right deal starts. We have access to most of the properties that are on the market for sale, thru our broker’s database. The way it works, most of the time, a property will be represented by one broker that will defend the seller’s interest. Buyer’s brokers can have access to the listings, and we, as your representatives, will defend your interest if you agree. The good news is that most of the time our commission will be paid by the seller, and split between the 2 brokers.

 

 

1. Verbal offers are common in NYC, but it is frequently asked to have a written offer with the basic aspects of the offer (price, location, financing, etc.).

 

2. Then, the offer is whether accepted, or countered. Barnes will defend your offer as much as we can so you end up with the best deal possible, and the closing date, price, and other details are set.

 

3. A real estate attorney that you will have chosen will then take over. A real estate attorney is required in all property transactions in New York City. 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, and the marketability of the title (if condo). Your Barnes agent can assist you in finding experienced attorneys, speaking your language.

 

4. After your lawyer concludes that the financial condition and /or the title 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 on an escrow account (most likely your attorney’s). The contract then be forwarded to the seller for signature .

 

5. If financing, you should move forward with your loan application, as the process can take in average up to 6 weeks. Your real estate agent can assist you in finding a mortgage broke .

 

6. 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.

 

7. When your "package" is finished, it will be reviewed by a Barnes Manager, and then, assuming it is complete, it will be forwarded to the 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.

 

8. 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.

 

9. After approval by the Board, you are ready to begin planning for a closing! You are not required to be physically there, as long as you have signed a power of attorney so someone you trust can sign on your behalf.

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 fashion, one can move from contract to closing in about 60 days. However, the cooperative process is more involved, and 60 to 90 plus days is not unusual.