Once you find the right apartment, you may feel the hard part is over. After all, your search may very well have taken months. However, you have reached a crucial stage. The process for submitting an offer is not merely about submitting a price you are comfortable with, and one you think the seller will accept.
You should familiarize yourself with the process since this can make the difference between an accepted offer and be hitting the pavement again to restart the search process.
The offer price
If working with an exclusive buyer’s agent rest assured he/she is on your side and has a fiduciary duty to you. An expert buyer’s agent does a lot of research to extract any information that is beneficial to you, such as the seller’s motivation and how long the unit has been listed and is obligated to pass it along to you. With that in mind, you need to consider that a lowball offer will not be taken seriously, particularly since the current New York City housing market is humming along nicely.
Crafting an offer price is part art/part science. It starts with using comparable prices, with certain information more heavily weighted. A similar sized unit in the same condition on the same floor in the building is the most valuable.
While many buyers fret over the proper price, trust your buyer’s agent experience and expertise. After all, he/she know the market and have done this plenty of times.
People tend to focus on the offer price, but there are other components that can affect the likelihood of your offer being accepted.
Your offer needs to include how much you plan on financing, as a percentage of the purchase price. Co-ops have special rules, and it is not unusual for a New York City boards to require a minimum 20% down payment. You and your agent will know this and how much the building expects you to put down before viewing.
Many NYC co-ops also have rules on how much liquidity you need to have post-closing. Boards are looking for you to have enough liquidity, typically one to three years worth of maintenance and mortgage payments post-closing. This can affect how much you can put down as a deposit. Additionally, most co-ops want a debt to income ratio of no more than 30%.
Cash offers put you in the best competitive position with greater leverage for negotiations. After all, cash is king. After that, those without a mortgage contingency (the deal depends on you obtaining a mortgage within a certain period of time) comes next. As your down payment goes down, so does the strength of your offer.
It is essential that you obtain pre-approval from a lender before submitting an offer. This allows you to become more comfortable with the amount you can borrow. It also gives the seller more confidence since he/she knows you have been approved for a loan, easing their mind. Your offer should include your pre-approval letter, along with evidence that you have the down payment and sufficient cash reserves.
Pre-qualification is a less formal process, with the lender determining how much of a mortgage you qualify for, without verifying it with supporting docs. This is not as strong as a pre-approval letter.
If you plan on making an all-cash offer, send in the proof that you can fund the purchase, along with the closing costs.
A mortgage contingency weakens your offer, as we’ve already explained. However, there are other contingencies you can place on your offer. The more onerous, the weaker your offer. Naturally, sellers dislike contingencies. In a buyer’s market, you may be able to get away with certain conditions on your offer since you there might not be any competing. Since this is a seller’s market below $3 million, you should carefully consider whether you should put in any contingencies.
Typical contingency buyers like to put in involves selling your home. Although common in other cities in New York this is not an option, remember, if there is another offer that is similar to yours that does not have such a contingency, yours will not likely not be accepted. If you are a first-time homebuyer, naturally, you won’t have to put this in, and have a potential advantage over an existing homeowner.
Your offer also includes a date you would like to close. The more flexible you can be, the better your offer and likely hood of getting your offer accepted.
REBNY Financial Statement
Resales in Condos and Co-ops require a REBNY Financial Statement, which should also be included with your offer package. This asks for your assets, liabilities, income, and expenses. The key is to have your financials in order since this is fairly detailed.
There is specific other information, some of it optional to include. Your legal name and address belong on offer. You will also need to add your attorney’s contact information; this will show the seller you are ready to move fast should you reach an accepted offer.