SELLERS, BUYERS | RENTERS, PROPERTY OWNERS
Selling or buying an apartment in New York City can seem extremely daunting, especially if you’ve never done it before (or if you have, and you have had a less-than-stellar experience). There is also a limitless amount of information online about how you should go about these tasks, which can often make things seem more overwhelming than they are and lead quickly to analysis paralysis. With this in mind, I’ve compiled a short list of FAQs below that are common in conversation about exchanging real estate in New York City. This is not meant to encompass every possible concern that could come up in a transaction, but is meant as a foundation for engaging in a successful sale or purchase of property and understanding what role real estate agents can play in this process.
If there is a question you have that isn’t addressed here, please feel free to reach out me and we’ll find an answer together.
- What does a buyer’s agent do?
- So, the agents that I am meeting at open houses aren’t representing me as a buyer?
- Won’t I save money if I buy direct, without a buyer’s agent, in the form of an automatic 3% lower sales price?
- What does a seller’s agent do?
- How do commissions work?
- Why do I need an attorney to buy or sell a home in NYC?
- What is the difference between mortgage pre-approval and pre-qualification?
- Should I buy a condo or a co-op?
- What about new construction?
- If I pay all-cash, can I get a better price?
- What does “in contract” mean?
- What is a mansion tax?
- What is a board package?
- Can I buy property in NYC if I live outside of the US?
- I still have questions, what should I do?
A buyer’s agent is responsible for coordinating your apartment search from soup to nuts, negotiating the lowest price and best terms available. They will also help coordinate with the rest of your team (bankers, attorneys, appraisers, etc) to ensure a sense of urgency is maintained throughout the process. This is in contrast to the seller’s agent, whose responsibility is to get the highest price possible for the seller.
Negative. The agents whose faces you see on listings on StreetEasy, Zillow, etc and that you are meeting at open houses are representing solely the seller’s interests. In fact, they are bound by law to be dutiful to the seller’s needs above all else, and to work their hardest to gain the highest price and most favorable terms for the seller. This duty often runs contrary to the buyer’s best interests, which is why it is so important to retain a buyer’s agent when you are looking to buy a home – especially in New York City. Seller’s agents also tend to be less flexible when negotiating with a buyer directly, as they assume that the buyer is not as experienced as a professional buyer’s agent would be with these transactions (which is often the case).
Not necessarily. The buyer’s agent’s main role is to negotiate the most favorable price possible for you as the buyer (along with the other duties mentioned above). If they know what they’re doing, and if the context allows for it, these negotiations can very easily save you more than 3% of the purchase price (which is what the typical buyer’s agent’s commission is in New York City). In addition to their understanding of mortgages, attorneys, appraisers and all of the fees involved in the transaction, along with the amount of stress that a good buyer’s agent will spare you, it’s often much more costly to work without one. It is also not uncommon (especially in Manhattan) for the seller’s agent to receive the full 6% commission, when there is not a buyer’s agent to compensate from the sale.
A seller’s agent is responsible for pricing, marketing, coordinating staging, as well as negotiating the highest sales price possible for the seller’s benefit. They also conduct showings, open houses and act as a liaison between the seller and the buyer’s agent (or the buyer’s directly, if they should be so unlucky!). Marketing can include their brokerage website, listing aggregates such as StreetEasy, Zillow, etc, social media and other internet advertising, post cards, and any other modern marketing technique that is applicable. If you do not have a real estate attorney or stager, your seller’s agent can likely offer you a list of recommended vendors and help you assemble your team to ensure the quickest sale and the smoothest possible transaction.
Real estate agent commissions in a sales transaction are typically paid by the seller and are typically 6% of the sales price, divided between the seller’s agent and the buyer’s agent and paid at closing. If there is no buyer’s agent, the buyer’s side commission may be deducted from the sales price or the full 6% commission may be paid to the seller’s agent. (See “Won’t I save money if I buy direct, without a buyer’s agent, in the form of an automatic 3% lower sales price?” above)
According to real property law in New York State, real estate contracts must be drawn up by the seller’s attorney. While a buyer’s attorney is not required by law, 99.9% of transactions in New York City have attorney’s on both sides. This is because if the buyer is not familiar with NYS real property law and the complexities of sales contracts, it leaves them open for liability during closing.
It is highly recommended that you retain the services of an attorney specializing in New York real estate, whenever possible. In addition to the uniqueness of the laws here, there is also a certain pace and urgency to the sales process that can often be lost when working with an attorney (or any other professional) who is out of state. This applies to both sellers and buyers.
A mortgage pre-qualification is a preliminary determination by a bank or lender to determine whether a buyer can obtain a mortgage. The buyer is generally asked to state their level of credit, assets, liabilities, income, and expenses. Based on this, the bank will estimate the loan amount they can expect to borrow. This is typically done quickly and without requiring any proof or documentation. Pre-qualifications are generally just used for curious potential home-buyers to see what they might be able to afford, prior to pursuing an actual pre-approval
Mortgage pre-approvals generally entail a far more thorough assessment. An underwriter will review all of the buyer’s financial and personal documents to determine if they meet their financial requirements or not. A pre-approval letter is a far better indication to a seller of your ability to purchase a property. If you are serious about buying property, especially if you are on a strict timeline, it is highly recommended that you obtain a pre-approval before you even start viewing potential homes. This will ensure that you and your buyer’s agent are ready to submit an offer as soon as you find the perfect place. Even in a “buyer’s market”, desirable apartments can receive multiple offers at the first showing – so it is important that you do as much as possible to prepare ahead of time. Your buyer’s agent can help you ensure that you have everything you need to move quickly.
This depends on what your plans are for the property.
The most important distinction between the two is that a co-op often requires board approval for buying, selling, renting, renovations and many other things that you might do with the apartment. Co-op boards are often made up of residents that live in the building, in order to ensure a cooperative (hence the name “co-op”) living environment for the residents.
Conversely, condos are much more similar to buying a home outside of New York City and work mostly the same as condos do anywhere else. Generally, condos do not require board approval – so if you can get a mortgage (or if you have the cash), you are likely to be able to buy a condo without an issue. They also tend to be much more lenient on renovations and subletting.
Co-ops also tend to be an order of magnitude less expensive than the same apartment would be if it were a condo. This is a natural market result of the difficulties and complexities of buying a co-op.
If you are looking for a home to stay in for many years, and you want to live with people who are doing the same, and you want to save some money while you’re at it – then a co-op may be for you.
If you’re looking to buy an apartment for a few years, or you are buying as an investment to rent out to a tenant, or if you are unsure and want the flexibility, then a condo may be a better option.
If you are just beginning your apartment hunting journey, it will be a good idea to discuss condo vs. co-op with your agent. They will be able to provide you with some suggestions based on your specific considerations.
New construction refers to an apartment building that has been recently built, in which you would be the first owner of the apartment. These buildings tend to offer things like modern amenities, energy efficiency, higher end renovations, and that “new home smell”. Lower maintenance charges are also common, compared to resale apartments.
It is important when dealing with new construction buildings to take careful note of the offering plan. There may be less room for negotiating on price than a resale, and not all new construction is built to the same level of quality. This is one area of the market you definitely do not want to go into without buyer representation.
If I pay all-cash, can I get a better price?
It is likely, but not guaranteed. This depends heavily on the seller, their motivation and their timeline. Because there is one less party and one less step involved in the process (mortgage banker and financing), all-cash transactions tend to go much more quickly and smoothly. If there are multiple competing offers, all-cash tend to rise to the top of the pile as well.
What does “in contract” mean?
Homes become “in-contract” once the buyer and seller have signed the purchase and sales agreement, and once the buyer has paid their deposit (usually 10% of the purchase price). It’s a legally binding term that locks both parties into completing the transaction. The only way out is if a contingency gets activated, allowing the buyer to exit the deal and get their deposit back.
What is a mansion tax?
A mansion tax is a tax generally paid by the buyer on properties equal to or greater than $1 million. The tax liability increases as the sale price of the apartment increases.
* 1.00% for purchases $1,000,000 to $1,999,999
* 1.25% for purchases $2,000,000 to $2,999,999
* 1.50% for purchases $3,000,000 to $4,999,999
* 2.25% for purchases $5,000,000 to $9,999,999
* 3.25% for purchases $10,000,000 to $14,999,999
* 3.50% for purchases $15,000,000 to $19,999,999
* 3.75% for purchases $20,000,000 to $24,999,999
* 3.90% for purchases $25,000,000 or greater
Most condos and co-ops in NYC have a board of directors, which is generally made up of residents. These boards manage the rules for the building, including how they select new buyers. Buyers will be required to provide a board package for their review, including financial information, personal information, and anything else they require. This generally happens after an offer has been accepted and a contract is signed, but before closing.
For condos, board approval is generally nothing more than a formality. Because of something called a “right of first refusal” (see https://www.realtor.com/advice/buy/right-of-first-refusal/ for more info on this), if a condo denies your application (either for buying or renting), the building corporation must buy (or rent) the apartment themselves. This is to increase the desirability of condos as compared to the complexities (read: headache) of co-ops.
Conversely, co-op board packages can require a lot more information and will generally include an in-person interview with the board. Unlike condos, co-op boards have the power to reject a buyer for whatever reason they choose – and they don’t have to tell you what it is. If you’re buying a co-op, having a buyer’s agent that is familiar with board interviews is highly recommended.
Definitely. New York City attracts buyers from all over the world, because of its stable price appreciation and investment potential. There are no extra stamp duties or taxes levied on foreign buyers. The only additional cost involved is that the buyer will need to set up a limited liability company (LLC) in the US to hold the property. Even some US citizens choose to do this to maintain anonymity, even though it’s not required.
Don’t panic! This list is by no means meant to address every possible concern that could come up during your sale or purchase transaction. That is what real estate agents are for! Feel free to reach out to me at firstname.lastname@example.org or give me a call at 1(646)438-1632 if you have any questions that aren’t answered here, or even if you just want to chat. I’d love to hear from you.