Today’s real estate market presents a unique opportunity for first-time buyers. The prices are dropping, the interest rates are low, and the market correction is not due to a recent catastrophic event. The last four downturns in New York City were all caused by particular circumstances:
Mid 1970s New York City was on the verge of bankruptcy
1989–91 October 19, ’87 stock market crash
2001 Dot.com bubble burst, 9/11 terrorist attacks
2008–09 Financial crisis
This time New York real estate is on sale and the market correction is due to years of steady price increases. This market adjustment has created extensive opportunities for buyers — ranging from people who could afford apartments that other times were not feasible to others who can negotiate an awesome deal. It is an excellent opportunity for upgrading your lifestyle and your investments.
According to Real Deal the “ … Manhattan inventory has been piling up for three years now. And there’s an avalanche of more product about to hit. In 2019, the inventory of new condos alone is expected to hit a massive 7,900 units — well above the average for the past few years, which has hovered between 3,000 and 4,000 units, according to appraisal firm Miller Samuel.”
What you need to know when you are ready to buy:
Organize your finances — proof of employment -pay stub, credit report, two years of tax returns, and bank and investment statements.
It is important to get pre-approved with a lender, so you know what you can afford. They will provide you with a range and aim for the high-end.
Explore neighborhoods so you can choose the one you prefer. Each area has distinct characteristics, and in Manhattan, it starts with deciding if you would like to live uptown, midtown or downtown then Eastside or Westside. Plan to go to open houses and walk around different neighborhoods to get a feel for the vibe and keep in mind your commute.
Condo, Co-op or Cond-op
Then there is the question of condo or co-op — The significant difference is that with a condo you own the apartment and have a title but in a coop, you have shares in a building, and you don’t have your name on a deed. Co-ops have more restrictions on renting and remodeling units. Cond-ops are condominium buildings that have both commercial and residential units and the residential units managed by a co-op corporation.
Another factor to keep in mind is the monthly common (maintenance) charges. Some buildings have lower purchase prices but very high common charges which often signifies that the building’s finances are in trouble.
For co-ops, the down payment ranges from average 20%- 25%% to 50% or more for higher-end buildings. Co-op buyers get a share loan, and the stricter sublet rules eliminate the owner-tenant requirement. But co-op buyers have to abide by the liquid asset requirements for board approval. The amount can range from a few months of maintenance payments to 3 times the purchase price. The average co-op’s financial standards are much higher than the average requirements for a mortgage.
For condos, the down payment is usually about 20% of the purchase price. Also, in condo transactions mortgage lenders require buildings to have healthy reserves and a low owner-tenant ratio before approving a loan.
Buyers are required to have a debt-to-income ratio of around 25% — 29%.
For co-ops takes six to eight weeks after submitting the board application. It is four to six weeks for the board to review an application and schedule an interview and about a week to receive a decision. For Condos board approvals are faster, and it usually does not require an interview.
In a condo building, these are apartments that are owned by the developer and are for sale for the first time. In the case of co-ops, the original owner or the corporation (that converted rental units into co-ops) owns these residences. Sponsor units do not need board approval.
Determine your list of must-haves in the building — elevator or walk-up, doorman, gym, view, laundry room, washer/dryer in the unit, children’s playroom, bike room, live-in super, pets allowed and balcony.
Buyers do not pay their agent’s commission. The seller pays the 6% commission which is divided between buyer and seller agents.
Real Estate Attorney
You will need a real estate attorney once your offer is accepted to review the contract. In New York state real estate deals attorneys are recommended. They are responsible for due diligence which includes evaluating board meeting minutes and financial statements (that provide clues to ongoing or potential expensive problems in the building,) offering plans (that include details on bylaws and risks.) Attorneys’ fees start roughly around $2,000 and increase depending on the complexity of the transactions.
Closing Costs for Buyers
Overall, closing costs for purchase prices below a million are roughly about 2% to 3% of the price, and for amounts over a million, it is about 3% to 4% of the cost. It Includes:
• Mansion tax — is a 1% tax on sales of $1 million and more and the buyer is usually responsible for the payment.
• Title Insurance — Owner’s Policy Premium
• Buyer’s Attorney Fee
• Move-In Deposit
• Title Search — Endorsements, Other Charges
• Board Application Fees
• Move-In Deposit — varies by building
• Deed Recording Fees
• Credit Check
o Managing Agent Application & Processing Fees
o Title Insurance — Mortgage Policy Premium
o Bank Attorney fee
o Mortgage Application, Credit Check & Processing
o Appraisal fee
o Mortgage Recording Fee — so it is part of the public record.
o Origination Fees — roughly about 1% of the mortgage amount
Overall, it is a buyer’s market — apartments prices are down, inventory is high, and sellers are struggling and open to negotiating. Happy hunting.
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