01) Get pre-qualified before you start looking for an apartment.
It’s essential to know how much a bank is willing to lend you before you begin your apartment search. This will help set a realistic budget and streamline your search. Additionally, if you plan to finance your purchase, most sellers expect a pre-qualification letter to accompany any offers. Being prepared with this documentation signals to the seller that you are a serious, qualified buyer.
02) Understand the difference between a condo and co-op.
When purchasing a co-op, you are buying shares in a corporation, whereas buying a condo means you own real property.
With a condo, buyers can often put down as little as 10% and finance the rest, but co-ops typically require a minimum of 20% down. Some co-ops may even require 50% or more, and a few do not allow financing at all. Each co-op sets its own financing requirements, which can vary widely from building to building.
It’s important to note that co-op boards often have stricter financial guidelines than banks. Being pre-qualified for a mortgage does not guarantee approval by a co-op board. Co-op boards impose their own financial standards, so buyers need to meet those criteria, in addition to securing financing.
03) Know the costs associated with buying an apartment.
While condos are generally more appealing due to fewer restrictions, they also tend to be more expensive, both in terms of purchase price and closing costs.
Condos are typically 9%-40% higher in price compared to co-ops, and closing costs for condos are higher. Closing costs usually range from 2%-3% of the purchase price for most buyers, but with condos, additional expenses come into play, such as title insurance (typically 0.5%-0.7% of the purchase price) and the mortgage recording tax. In NYC, the mortgage recording tax is 1.8% for loans under $500,000 and 1.925% for loans over $500,000.
If you’re purchasing a condo in a new development, the closing costs are even higher. Buyers are responsible for the New York State (0.4%-0.65%) and New York City (1%-1.425%) transfer taxes, as well as the sponsor’s attorney fees, which generally run around $3,500. However, some of these fees may be negotiable.
04) Do your own research
It used to be that apartment listings were only accessible through real estate brokers, as there is no central MLS (Multiple Listing Service) in NYC. Now, you can access listings, sales comps, and other valuable information through platforms like StreetEasy, the go-to resource for apartment listings in New York City.
05) Work with an experienced real estate broker and understand the risks of dual agency.
When buying an apartment, it’s essential to work with an experienced real estate broker who can represent your best interests. Be aware that if you work directly with the seller’s broker, you enter into what’s known as a dual agency situation, where the broker represents both the buyer and seller.
In a dual agency, both parties forfeit their right to undivided loyalty from the broker. This type of relationship can lead to potential conflicts of interest, as the broker must remain neutral and cannot advocate for either side. Here’s what dual agency means in practical terms:
- No advocacy for either party: The broker must treat both clients equally.
- No negotiating on behalf of either party.
- No advise on price or terms.
In dual agency situations, confidentiality is paramount, and the broker must take extra care not to disclose any information that could put either party at a disadvantage during negotiations.
Typically, the seller pays the broker’s commission, whether the buyer works with the seller’s broker or has their own agent. Given this, it makes sense for buyers to work with a buyer’s agent, who will focus solely on their best interests.
Looking to buy or sell a property in NYC? Contact Dickse Fitzgerald