Those who have never purchased a New York City apartment tend to underestimate how long it takes to buy a condo or co-op apartment. From finding a reputable buyer’s agent, real estate attorney, financing, viewing properties and board application to closing day. Unless you are buying a new development condo or townhouse with all cash, you will need to cultivate the virtue of patience. With a knowledgable buyer’s agent, proper planning and foresight you can streamline the process.
Below are the process and timeline of what to expect on your quest for owning a condo or co-op apartment in New York City.
Table of Contents
- Estimating Your Budget
- Mortgage Pre-approval
- Brainstorming your Wish-List
- Deciding between a Condo or Coop
- Hiring an Attorney
- Finding a Property
- From Offer, Negotiation to Acceptance
- Due Diligence, Contract, and Signing
- Mortgage Application and Commitment
- Compile and Submit Board Application Package for Review
- Co-Op Board Interview
- Preparing Closing Costs
- Schedule the Closing
- Closing Day
Estimating Your Budget
(Estimated timeframe: 1 – 3 days)
Before you start searching for the perfect home, you need to calculate how much of your weekly or monthly salary you can spend on a mortgage payment. Once you have a figure in mind, you also need to consider how much it will cost to maintain an apartment, including monthly common charges or maintenance fees, repairs, taxes, and utilities. Then, you have to factor in closing costs and your down payment, which can run from 10 percent to as much as 20 percent in the case of a co-op.
(Estimated timeframe: 3 – 7 days)
The next step in the purchasing process is to contact a mortgage broker or banker to help you get pre-qualified for a loan. To prove that you are a serious buyer, get a pre-qualification letter to show your financial standing, which will prepare you to start searching in earnest. You can’t start shopping until you know what you can afford. Keep in mind that your final mortgage approval is contingent on having the necessary down payment. Condo apartments typically require 10 percent down, while co-op apartments need at least 20 percent or more.
In Manhattan, approximately 20 percent of the buildings are condominiums, and the other 80 percent are cooperatives. Although Condominiums allow for 90% financing since the financial crisis, most lenders require that the buyer put down 20%.
Brainstorming your Wish-List
(Estimated timeframe: 1 – 2 days)
After receiving your mortgage pre-approval, you will need to decide how much you can afford for your monthly expenses and down payment. Your wish-list is next required, make a list of your priorities, preferences, and needs.
Your wish list will help you determine how much your new apartment will cost. If you are using a buyer’s agent, your representative can take this list into account while matching you up with as many of the better apartments as possible that fit your budget and priorities.
- How large should your apartment be?
- How many bedrooms do you need?
- What amenities do you need?
- Where would you like to live?
- Do you need a washer/dryer?
- Do you need or prefer to have a doorman?
- Are you ok with a walk-up building or elevator is a must?
Deciding between a Condo or Coop
(Estimated timeframe: 1 – 3 days)
When choosing a property, you will need to determine if you prefer condos or coops. You will also have to understand property value to avoid a bad deal, and whether you are buying a home or an investment property. You will also need to know essential information about different neighborhoods. To find a great place to call home, you may have to consider dozens of options, but an experienced buyer agent will help you narrow your search down to properties that fit your lifestyle best.
Be warned, however, that while co-op boards may not be quite as rigid as they appear in films and television shows, they are still notoriously choosy and have many rules and regulations that can be difficult to navigate.
So what is a co-op? Co-op is short for a Co-operative, which is a corporation that owns a building or apartment complex. Co-op residents will often describe themselves as owners, but this isn’t entirely accurate. Residents of a co-op do not actually “own,” the real estate, rather they are shareholders in the corporation. This relationship includes a “proprietary lease” which gives the entitlement to use the apartment. The size of your co-op apartment tends to govern the number of shares you own in the corporation: the more significant the co-op, the more shares. The building is considered an entity unto itself, and a co-op owner owns shares of it, rather than having direct ownership.
To live in a co-op, you must first be approved by the Board of Directors, which has veto power to keep out undesirable residents. In addition to your apartment cost, you also pay a portion of a monthly maintenance fee to cover things such as heat, hot water, insurance, staff salaries, real estate taxes and the mortgage indebtedness of the building.
Expect a larger downpayment
Another part of the co-op structure is that there is a more substantial down payment 20% or higher, which is determined by the co-op board. The co-op board decides how much of your purchase price can be mortgage financed and how much must be paid in cash. These payments are exceptionally high in desirable buildings, which also have very tight rules and regulations about whom is allowed ownership.
Co-ops make up somewhere in the neighborhood of 70% of the New York real estate market, while condos make up the remaining 30% approx. While co-ops have their shortcomings condos, tend to be more expensive overall.
Condos are becoming more popular as they have more financing options, a more manageable application usually and acceptance rates. However, condos are more expensive as there are fewer available, although this is changing as more new construction buildings rise around the city.
A condo is a “real” ownership deal, as the owner gets a deed and an individual tax bill. There are still maintenance fees for common areas, but these tend to be less than those for co-ops. Condos tend to be good options for those that use creative financing, including young buyers and investors.
Over the past decade, both co-ops and condos have been subject to the same fluctuations in the market. However, cooperatives remain lower priced overall and are still the most popular option for first-time buyers.
Hiring an Attorney
(Estimated timeframe: 1 – 3 days)
Attorneys in New York City represent buyers and sellers. The seller’s attorney will put together a sales contract. Your attorney is needed to review the buildings financials, bylaws and legal structure to assure that you can accept the terms. An Elika broker can help you find a real estate attorney who has experience in Manhattan.
Finding a Property
(Estimated timeframe: 3 weeks to 3 months on average)
If you want things to move fast, you have to know what you want while also being realistic. Your budget will be a significant factor, the more cash you doe a down payment, the more options you’ll have.
The length of your apartment search can take days, weeks or even months. It depends on how selective you are and how stringent your preferences may be. Most buyers will see 15 to 20 apartments before making an offer. An Elika buyers agent would be happy to represent you in your search if you would like someone advising you on your purchase. The broker can preview apartments or set appointments for you to visit the better options that match your needs; this can save you time while searching to find the perfect home.
If an Elika agent is searching for you, ask for a short list of the most promising apartments. You or your agent should visit as many properties as possible. Do not be fooled by advertisements. You absolutely must see the apartments first-hand before making an offer. To find the right property, you might want to read our article: Forget about Location, Location, Location, Think Macro.
Expect a lot of competition from other interested buyers if your budget is below $1.5 million. Other factors that will influence how long your search takes include:
The more popular the neighborhood, the longer the search. Communities with high demand and low inventory include top-market areas like Tribeca, SoHo, Nolita and Greenwich Village. In Brooklyn, people are drawn to the quaint, tree-lined streets of Brooklyn Heights, Carrol Gardens, Fort Greene and Park Slope. The usual workaround is to find apartments in areas that are close to, but not in, these areas.
Your Real Estate Agent
Hiring the right buyer’s agent for the job can mean the difference between success and failure. The right agent is one who knows the neighborhood in question, is familiar with the inventory, understands your needs and wants, and, just as importantly, is someone you can get along with. Be sure to ask the right questions when interviewing potential agents.
Your ability to compromise
It’s very rare for a buyer to find everything they’re looking for in a deal. NYC real estate is all about compromise. Decide early on what you need and would like but can do without. Do you need a building with top-of-the-line amenities like a doorman, pool, and gym? You might need to forgo a one-bedroom in place of a studio. What about having a lot of space? You may need a bus to the nearest subway. If you don’t want your search to take forever, you need to be flexible in your wants and needs.
From Offer, Negotiation to Acceptance
(Estimated timeframe: 2 days to 1 week)
In New York City, an offer should be submitted in writing. When you find an apartment that hits 80% of your wish list, we would recommend proceeding with an offer. Your agent will send your offer to the seller’s agent or directly to the seller.
If you’re going to be making a lowball offer, make sure you have reasons to back it up. Sellers want to know that you’re serious and you can do this by having all the paperwork and team of professionals including real estate attorney and banker etc. in place and ready to go. Include your mortgage pre-approval letter and your, submit offer form, along with the contact details of your attorney and lender.
Including a “Love Letter” can also help sweeten the deal if you’re facing a bidding war with other interested buyers. Also, be wary of negotiating mistakes that could stall the process, or tank the whole deal.
Buyer’s Agents can help
A Buyer’s agent can help you with negotiations by generating a comparative market analysis so that you understand the properties fair value and the likelihood of negotiations. Condos and Co-op are generally sold as-is. That means how you see it is how it will be sold to you. If you want perhaps the furniture in the condo or different fixtures, you need to negotiate for them before the sale.
Once you finalize the price, your agent will put together a deal sheet that lists the price and the agreed-upon terms of the sale. Remember that nothing is guaranteed and additional offers may still be entertained until a contract has been countersigned by the seller even if you have a negotiated price.
Negotiations are also affected by market conditions. If the market has an excess inventory, negotiating is easier. If there are not as many apartments for sale, negotiations might not work.
Due Diligence, Contract, and Signing
(Estimated timeframe: 5 to 7 days)
Once an offer is accepted a deal sheet will be circulated between the brokers and attorneys. After this, the seller’s attorney will prepare and send a contract of sale, along with the building financials and by-laws to your attorney to review. This due diligence period between both sides can take one to two weeks depending on the specific issues that come up during the attorneys’ evaluation and back and forth regarding contract rider notes if any.
Assuming that the home inspection turns up no issues and both parties are happy with the contract of sale, the buyer signs the contract and makes the 10% escrow down payment which is delivered to the seller. Once the seller countersigns it and sends it back to your attorney, you now have a binding contract of sale.
Possible contingencies include financing, approval by any co-op or condo board, closing dates.
Mortgage Application and Commitment
(Estimated timeframe: 45 – 60 days)
Mortgage applications cannot be processed before the contract is executed. Once the application is complete, your lender will release a commitment letter. This letter is required to complete your board package/condo application if you are financing an apartment.
If you’re financing, now is the time when you pass on your fully executed contract to your lender. You’ll need to submit bank statements, pay stubs, W2s, tax returns, and whatever else is required for the audit. Along with this due diligence on both your financials and the building, a home appraisal will be conducted. On average the process can take 30-45 days but can take longer depending on the process and how many follow-ups are required.
Compile and Submit Board Application Package for Review
(Estimated Timeframe: 30-45 Days)
Important: When buying in a New Development or a Sponsor Sale, please disregard this step.
Once your purchase contract is executed, your condo board will give you a board application to complete. This application must be completed and approved before closing takes place. If there is no mortgage involved, it takes about 2-3 weeks to gather all the information needed for the application.
Co-ops, however, require a Coop Board application be completed, an exhaustive list of documents and information. Most co-ops require the following in a board package: Complete financial disclosure with supporting documentation, detailed employment history, current salary, personal and business references, two years of tax returns, and comprehensive credit history.
Board approval can be subject to numerous delays that are entirely outside your control such as their schedules to meet and procedures for reviewing board packages. If you’re fortunate, have a superb board package and ace the board interview, you will receive the green light to close. More often it can take up to 45days in total from the date of board application submission.
While condos also require board approval, this is more of a formality as they have much less power to refuse your application. Assuming you’ve provided all the necessary paperwork, all you’re waiting on is a waiver that declines their right of first refusal. Condo board approval can take anywhere from a few days to a month.
Co-Op Board Interview
(Estimated Timeframe: 30 – 60 minutes)
Most co-op boards meet once a month, and many do not respond in August. Frequently, meetings are in the evening on a weeknight. Keep in mind that an interview does not guarantee approval. The board will decide up to a few days after the meeting. Understanding coop board interview questions that may be asked will help you prepare.
(Estimated Timeframe: 30 – 60 minutes)
Best to be done the day before or the day of closing. It is essential to inspect the property before the closing date. Verify that the appliances, faucets, light fixtures, plumbing, and outlets are all working. Make sure the seller has left or is preparing to move. Your Elika agent can help you complete the walk-through.
Preparing Closing Costs
When negotiating towards a final offer price on an NYC property, both buyers and sellers should have a reasonable idea of what their closing costs will be. This is difficult to estimate, potentially running into hundreds of thousands of dollars which will be added onto the purchase of the property. Worst of all is that buyers tend to underestimate those final closing costs.
New York City has a plethora of co-ops and condos. There are distinct differences between the two. It is not discussed often, but with the different ownership structures, there is a vast disparity between the closing costs for a co-op and condo. Purchasers should prepare to pay a markedly higher amount for condos.
Condos most closely align with what one thinks about home ownership. That is, owning real property. Co-ops are more akin to owning shares in a corporation. We provide a breakdown for buyers to understand better where the difference lies.
Condo Closing Costs
|Own Attorney:||$2,000 + up|
|Managing Agent Application Fee:||$300 +|
|Credit Report Fee:||$75 - $100 per applicant|
|Lead-Based Paint Disclosure Fee:||$0 - $50|
|Mansion Tax:||1% of the purchase price when $1 million +|
|Move-in Deposit:||$500 - $1,000 (refundable if no damage)|
|Common charges, real estate taxes, and insurance:||prorated as of the closing|
|Condo Mortgage Associated Fees:||prorated as of the closing|
|Mortgage Tax:||(Paid by the buyer, condominium/townhouses only, when financing )|
|Recording Tax Sales under $500,000:||1.8% of the entire mortgage|
|Recording Tax Sales over $500,000:||1.925% of the entire mortgage|
|Application, Credit Check, etc:||$500 + up|
|Appraisal:||$250 + up|
|Bank Attorney:||$500 + up|
|UCC-1 Filing:||$50 + up|
|Recognition Agreement Fee:||$200 + up|
|Fee Title Insurance: Approx:||$450 per $100,000|
|Mortgage Title Insurance:||Approx. $200 per $100,000|
|Recording Fees:||$200 - $300|
|Origination Costs - Points:||0-3% of the loan value|
|Departmental Searches:||$200 - $400|
|Real Estate Tax Escrow:||2-6 months|
|If Purchased Directly from Sponsor *New Developments|
|NYC Property Transfer Tax:||- 1% of purchase price up to $500,000|
|- 1.425% of purchase price over $500,000|
|NYS Transfer Tax:||$4 per $1,000 of the purchase price|
|Sponsor's Attorney Fee:||$2,000|
Co-op Closing Costs
|Own Attorney:||$1,500 + up|
|Bank Fees: Points:||0% to 3% of loan value|
|Application, credit check, etc:||$500+|
|Miscellaneous Bank Fees:||$500+|
|Application Fee (Credit Report/Appraisal):||$500+ ( Short-Term Interest; Equal to interest|
for the balance of month in which you close. )
|Move-in Deposit:||One-time fee of $500.00+|
|Recognition Agreement Fee:||$200|
|Maintenance Adjustment:||Pro-rated for the months of closing.|
|Mansion Tax:||1% of entire purchase price where price is $1,000,000 or more.|
Closing Costs Explained
Closing costs in NYC are usually 2-6% of the purchase for buyers. The final bill is based on several factors such as property type (co-op or condo), level of financing, purchase price and whether or not the property is new construction.
If your purchasing a condo the closing costs will be higher, for a start, you’ll need to cover title insurance. This is set by New York State and comes with several administrative charges which all together come to about $3,000 to $4,000. Then there are the extra costs if you’ll need a mortgage. Bank fees run from $2,000 to $3,000 while bank attorney fees and the appraisal go from $500 upwards. If the loan is over $500,000, you’ll need to cover a mortgage tax of 1.925%, for loans under $500,000 it’s 1.8%, something which only applies to condos.
Whether you’re buying a co-op or condo, you’ll need to pay your attorney’s fees, which can range from $2,000 to $3,000. The deal can be more complicated than usual if you would set up an LLC to purchase a condo as a foreigner. Then the attorney costs will increase and require additional work in filing the LLC.
If the property is purchased at over $1,000,000 an extra 1% mansion tax is added, to be paid by the buyer. For instance, a property sold for 1.87 million would have a mansion tax of $18,700. It’s not uncommon in negotiations for the purchase price to get knocked just below the $1 million thresholds to avoid this tax.
Mortgage recording tax
This is typically a condo buyer most substantial closing cost. The state and city both impose a charge on both new and refinanced mortgages, with the percentage increasing with the mortgage balance.
The tax rate ranges from 2.05% for mortgage balances less than $500,000 and increases to 2.175% for loan amounts more significant than this amount. The tax rises to 2.8% for mortgages greater than $500,000 on specific properties, but this does not apply to condos.
For instance, assuming the $945,000 price and a 20% down payment, buyers owe more than $16,000.
Co-op buyers do not have to pay this tax since they are not buying real property. Instead, you purchase shares in a corporation and receive a proprietary lease that allows you to live in the unit.
Lenders require condo buyers to buy title insurance to protect against future claims that arise from title disputes. The insurance company bases the premium amount as a percentage of the purchase price.
Aside from the lender’s title insurance, an owner can also purchase title insurance. The former’s premium declines as the mortgage balance decrease while the owner’s policy protects you for the full purchase price or, if you choose, the property’s market value.
However, lenders do not require co-ops owners to buy title insurance.
Real estate taxes
While only condo owners bear responsibility for mortgage taxes and title insurance, both pay real estate taxes. If you choose to pay the tax on your own, you do not have to set up an escrow account. This means you have to budget accordingly. However, if you roll it into your mortgage payment, the lender is going to require you to put a certain amount aside at the time of your closing. This means you have to come up with potentially several months’ worth of taxes.
A co-op’s taxes are based on the number of shares you own. Hence, you pay this with your monthly maintenance fee.
Each co-op and condo is different in the fees they apply. Most co-ops and condos have move-in and move-out fees that range in price from a few hundred to a couple of thousand dollars. Board application fees range on average from $500 to $700. When making your board application, they will send you a list of what’s needed, and the fees involved. Buyers should read this carefully, so they fully understand what they’re getting into.
The sponsors closing costs
A significant expense for buyers of new construction properties is that they are responsible for the developers closing costs. This includes transfer fees, the attorney’s fees and, if applicable, their units share of the sponsor’s apartment. This also applies to sponsors in co-op apartments. Depending on the purchase price, this can all add up to hundreds of thousands of dollars.
It is a minor amount, but mortgage and deed recording fees are generally lower for co-ops. Co-op buyers are likely to save a couple of hundred dollars, but you are likely to spend any savings you realize on higher board fees.
Buyers should carefully consider all potential closing costs. Even with the best research, you’ll only get an approximate estimate. You won’t know the final bill until closing day.
Schedule the Closing
(Estimated Timeframe: 1 – 2 weeks after approval by the board)
The closing date all depends on the parties involved. Assuming that everything is in order and everyone is eager to close, it can take about one to two weeks to schedule a closing. Your attorney needs to coordinate with the title company, confirm with the bank that they’re ready to show up with the checks and find a date that works for all the parties involved.
Our useful calculator allows you to get an estimate and comparison of closing cost quickly.
(Estimated Timeframe: 1 – 3 hours)
On closing day, it will finally be time to hand over the remainder of the payment and receive the keys to your new home. The average timeframe in NYC from an accepted offer to closing day is 60-90 days. But with so many variables in play, it can sometimes take longer.