New York City real estate is different – even if you’ve owned real estate before in other states or counties, the process here in the city is full of unexpected legal twists and turns which can trip up anyone, even seasoned investors. So, how do you go about buying a condo in NYC?
- Speak with your bank (or mortgage company, if financing) to determine budget
- Find a well-respected real estate agent from a reputable brokerage to facilitate the search and transaction process. Once you have your agent secured, they’ll help you find a condo that you’d like to purchase
- Find a real estate attorney before you need to prepare an offer so you can hit the ground running once you’ve found the condo you’d like to purchase(your agent should be able to recommend one)
- Work together with your agent and attorney to prepare and submit your offer, enter negotiation, and (hopefully!) get an accepted offer.
- Your agent will prepare the deal sheet, which is a summation of the terms of the transaction and send it along to both the buyers and sellers attorneys
- Sellers attorney will draft the contract of sale while your attorney does their due diligence on the apartment/building and negotiates the contract on your behalf
- Sign the contract and pay your contract deposit (10% of sale) – Buyer signs first, then the Seller
- Work with your mortgage banker to submit your loan application – the commitment letter, loan application, and appraisal are commonly requested in the application to the board. If financing, lock in an interest rate with your mortgage lender
- Your attorney assembles the title report
- Work with your agent to prepare and present your application to the condo board in order to obtain the waiver of their right of first refusal
- Get the clear-to-close from your lender and schedule your closing date
- Buy a homeowner’s insurance policy
- Your attorney will provide you with a closing statement prior to closing with instructions on the checks that must be prepared for closing
- Do your final walkthrough of the home with your agent just before the closing date in order to make sure the apartment is in the same condition after it has been vacated by the seller and according to the contract of sale
- Attend your closing and get your keys! You’re done buying a condo in NYC!
For the purposes of this guide, we’re including steps that must be taken if you’re planning on financing part of the purchase. If you’re not financing, good news! You’ll have a few less items to check off your to-do list.
While the list above covers the basic flow of buying a condo in NYC, there’s a lot more to each step than meets the eye. Read on to get inside knowledge about each step of the buying process AND learn more about what makes condos so desirable to property investors in Manhattan.
Step 1: Get Your Financing Documented and Approved
Buying a condo in NYC is different from many other places around the country and world. If you’ll be financing any portion of the sale, you’ll need pre-approval or pre-qualification from your bank or lending institution. These documents state what your lender is willing to give you in order to finance the purchase.
- A pre-approval is more formalized, and therefore more accurate. In order to get one you have to submit pay stubs, tax returns, bank and brokerage statements, and agree to a credit check.
- A pre-qualification is a less formal document that a lender gives out stating the amount they think they’d be willing to lend you without extensive financial documentation to support that estimate.
It’s important to have a solid grasp on your budget and buying power because you’ll need it when you submit an offer on an apartment – it’s customary to submit your pre-approval letter and a REBNY Financial Statement whenever you put in an offer on a condo in NYC.
Step 2: Getting a Real Estate Agent and Apartment Hunting
While it’s technically possible to purchase an apartment in Manhattan without a real estate agent, the market is so competitive and there are tons of nuances to negotiating a contract to closing. We wouldn’t recommend trying to navigate that minefield by yourself.
PS: We covered this in-depth in Episode 17: What To Look For In A Great NYC Real Estate Agent
Here’s what to look for in a good real estate agent:
- Specialization in the type of transaction you’re interested in (geographic area, price point, etc.)
- Someone that you trust – they will likely know more about you (especially financially) by the end of the transaction than almost anyone else in your life
- Someone that understands the unique challenges that purchasing property in NYC entails
- Experience – this should not be their first transaction… you want someone seasoned when you’re buying a condo in NYC, a significant investment.
When you’ve found a real estate agent that you click with who is knowledgeable about condo purchases and the market as it stands, it’s time to start apartment shopping. Your agent can help you figure out what you absolutely must have in your new home, find listings that fit that criteria, and schedule showings around your day-to-day life.
We recommend allowing at least 2 months for apartment hunting, as some of your deal-breakers or must-haves may not reveal themselves until you’ve seen a few apartment listings. That being said, it can take as long as you need it to, whether that’s 6 days or 6 months.
Check out Corcoran’s listings in New York City here!
Step 3: Choosing a Real Estate Attorney
New York is a state that requires an attorney to close a real estate transaction, so you’ll need to find a great real estate attorney in order to actually move forward with buying a condo in NYC.
Note that we said real estate attorney, not just a ‘regular’ attorney – there’s a big difference. If the person you have in mind doesn’t work in real estate transactions day in and day out, you’re better off hiring an expert. The good news is, your real estate agent absolutely knows and regularly works with at least a handful of excellent real estate attorneys, and they’d be happy to recommend you to someone they trust.
The real estate attorney’s work really starts once the offer is accepted, but they are an integral member of the team throughout the transaction, so you’ll want to find someone you can trust sooner rather than later.
Step 4: Making An Offer (And Getting it Accepted)
Once you have your heart set on a particular condo, it’s time to put together an offer. Discuss what apartments with similar floorplans and finishes are selling for in your neighborhood with your agent, and consider those comps when deciding how much you want to offer. Presenting an offer on a NYC apartment is typically more involved then just submitting a price, trust your agent to guide you on what items to include with the offer and how to make your offer as compelling to a seller as possible.
After you submit your offer, it’s time for your real estate agent to shine. Negotiations can be tricky, especially if sellers are set on getting the highest price possible. However, your agent will work with you to strategize and negotiate a fair price, concessions, and get you one step closer to buying a condo in NYC.
This process can take a day, a few days, or even a few weeks, depending on how many offers have been made on the apartment and how responsive both your team and the seller’s team is. Time is one of the biggest factors in deals falling apart, so it’s important to move quickly whenever you can in order to ensure things go smoothly.
Step 5: The Deal Sheet and Due Diligence
Once your offer is accepted, a deal sheet will be circulated amongst both your and the seller’s teams. This is a detailed breakdown of all of the specific terms of the transaction. It’s important to review and meet these terms as soon as you can in order to get to the contract signing, which locks in your deal.
The finalized deal sheet is then used by your attorney to complete their due diligence. This consists of your attorney researching/reviewing the condo building’s offering plan/prospectus, most recent financials, board minutes, and acquiring a completed questionnaire from the managing agent in order to identify any hiccups which could disrupt the sale or have an adverse effect on you as a new owner.
You will receive a summary of their findings when they complete their due diligence, and if there are no issues which prevent the purchase from going forward, you can move on to the next step.
Step 6: Signing the Contract and Paying the Contract Deposit
After due diligence is completed and no issues are found, you will be the first to sign the contract, which sets the rest of the sale in motion. Until you sign the contract, nothing is legally binding, so it’s important that you get here quickly after your offer is accepted.
When you sign the contract, it’s also time to pay your contract deposit to the seller, which is typically 10% of the purchase price. This deposit is usually held in escrow by the seller’s attorney until the closing date, when it is applied to the total cash you are required to bring to closing.
Step 7: The Commitment Letter and Locking in Your Interest Rate
After you sign the contract and pay your contract deposit, the seller will also sign the contract. At this point your contract is considered fully executed and all the other dominoes begin to fall into place.
It’s important to be really active in this step of the process as you usually have about 30 calendar days after the contract becomes fully executed to submit the commitment letter from your mortgage company and the board application to the managing agent and board.
This commitment letter is essentially a step up from a pre-approval. In order to get it, your lender asks for an even more in-depth look at your finances and the finances of the condo, and in turn they provide a more detailed commitment to how much they’re willing to lend you and lock in the interest rate on your loan.
It’s crucial to schedule an appraisal upon the contract being fully executed, as you’re getting the commitment letter, because your lender will want to see that the property is satisfactory and fair compared to the purchase price you and the seller have agreed upon.
Step 8: Title Report
While you are focused on your commitment letter, your attorney will order a title report for your new apartment. This means they conduct title searches on the apartment, the building it’s in, and even the land it’s built on.
This search is part of the legal process which makes sure that the seller is able to provide you a clean deed at closing. Buying a condo in NYC is a breeze with the peace of mind a title report brings.
Step 9: Condo Board Approval
If you’ve done any amount of research on buying an apartment in NYC, you’ve likely come across some horror stories about co-op board applications. Luckily, condo boards are generally much more relaxed when it comes to getting their approval on a sale.
Learn more about the differences between co-ops and condos in Episode #5
You and your agent will put together a presentation package focusing on your financial profile, but may also include reference letters, etc., and typically are very similar to a co-op application in regards to the requested documents. Don’t worry, buying a condo in NYC isn’t nearly as daunting as a co-op purchase. The condo board wants to see that you have the money on hand to pay the down payment and what your debt to income ratio is, to prove that you can easily afford the mortgage payment on your new condo.
While condo boards have the right of first refusal to a sale, invoking that right includes the caveat that the condo board must then purchase the condo at the price and terms that you and the seller agreed upon. This means that condo application denials are extremely rare, though not completely unheard of, and it is really in place in order to deter one owner from severely under-selling their apartment in the building.
Step 10: Clear-to-Close and Choosing a Closing Date
Following the approval of your purchase by the condo board, you’ll get a final clearance to close from your lender. Once you have that in hand, you need to schedule your closing date. It might be hard to get your ideal closing date, due to the number of people whose schedules you have to coordinate with.
Step 11: Homeowner’s Insurance
Purchasing a homeowner’s insurance policy is always a good idea, but if you’re financing it’s likely a requirement of your mortgage. Make sure you have one secured before your closing, so that you can enjoy your new home with peace of mind that its contents are protected!
Step 12: Closing Disclosure and Checks
In the days leading up to your closing date, keep a close eye on your email or mailbox for your closing disclosure and check instructions. The closing disclosure is a document from your lender that explains in detail all of the facets of your mortgage (loan fees, interest rate, taxes, closing costs, etc).
Your attorney will advise you on the check instructions in order for the closing day to run smoothly and for you to finish buying a condo in NYC. They must be official bank checks or certified checks from a member bank of the NY Banking Clearinghouse. If that responsibility is overwhelming, you can wire your attorney the total of all the checks needed and ask them to prepare your checks for you.
Step 13: Final Walkthrough
While you don’t necessarily need to look over the property with a fine toothed comb, the final walkthrough is your last chance to note any issues with the apartment that you would like addressed before you take possession of it. Especially if there were repairs requested as a part of the sale, this is the time to make sure your new home is to your satisfaction!
If you uncover anything that needs to be addressed, your agent will negotiate with the seller’s team to handle your concerns and make any adjustments before closing.
Step 14: Closing Day
Generally, closings take a while, because there are so many forms for everyone to review and sign. Be ready to spend a couple of hours reviewing and signing papers. You will have your team (agent and attorney) with you, as will the seller, and there will be a representative from your lender if you’re financing your purchase.
Ultimately, once the forms are all signed and everyone has been paid their fees, you’ll get your keys and officially be done buying a condo in NYC!
The distinction between a condo and a co-op is NOT an architectural one. Instead it’s a difference in the ownership and management structure of the building and the limitations the management places on what you may or may not do with your apartment.
What this means for you is that there may be two identical apartments in two identical buildings, but if one is a condo and one is a co-op, there will be a marked difference in the purchase price and process. When you’re buying a condo in NYC, you actually own the apartment outright and own a percentage of the building’s common areas.
In a condo building, there is a board which runs the condo association and manages the property, but they don’t typically restrict how you take ownership nor your ability to sublet the apartment. If you want the option to sublet the apartment in the future, are a foreign buyer or investor, or want to take ownership in the name of an entity rather than your personal name(s), a condo is the property for you.
The slight drawback to the freedom and flexibility owning a condo gives you is that they are generally much more expensive than co-ops of the same floor plan and finishes. Expect to pay or finance at least 15-20% more when buying a condo in NYC, if that’s the path you choose.
Closing on this Blog Post
While buying a condo in NYC, the greatest city in the world, is more complicated than in the rest of the United States, it’s a process that can be fun and relatively quick if you choose your real estate team wisely and make sure to stay engaged in every step of the process.
If your agent has New York City specific real estate expertise, superior market knowledge, and an informative white-glove approach like that of the members of the Gasdaska Conlon Team, you’ll be kicking your feet up in your new condo in no time.
Have any lingering questions that we didn’t answer? Ready to take the first steps towards buying a condo in NYC? Please, reach out! The Gasdaska Conlon Team is here to help you in any way, whether you’re a first-time buyer, a long-term client, or just curious about the process.
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