The process of buying a condo in Manhattan is similar for those buying a condo as an investment property or as a vacation home, whether you are a U.S or a foreign real estate buyer. The main difference is that for investment property buyers, the down payment required by the lender is higher. The following information applies to both U.S and foreign real estate buyers:
- What is Buying Process for an international real estate investor and what is Purchase Time Frame?
- What is Closing?
- Does buyer have to be in New York for the closing?
- Closing costs / Transaction costs
- How can I transfer funds to New York?
- What are expenses associated with owning an apartment in Manhattan New York?
- How long does it take to legally own a condo/coop after my offer is accepted?
- How can I ensure that my purchase is legitimate, safe and legal?
- Why Condo?
What is Buying Process for a foreign real estate buyers or an international real estate investor and what is Purchase Time Frame?
Below is the process for buying a condo in Manhattan, New York:
Estimated Time to closing after identifying property:
With Financing: 45 ~ 60 days
All Cash: 30 ~ 45 days
1. Obtain pre-approval for mortgage from lender (1-5 days)
Lender can be a US bank or overseas bank at buyer’s home country with an international mortgage program. If you are an all cash buyer, you do not need this step.
Condominium typically requires 10% down, condop 10~20% down, and coop apartments generally require at least 25% down. Depending on the coop building, down payment requirements vary. Pre-approval gives greater negotiating power.
2. Identify Property (2 days – several months)
Property viewing can be a pleasurable or tiring experience. We have every single apartment currently available for sale in our database updated daily and view them daily and know what suits our clients’ needs and wants. Our goal is to help our clients to save time and to buy at the best possible price.
3. Make offer and negotiate price (1-7 days)
Negotiation skills are critical. Experienced negotiators could obtain many favorable financial and non-financial terms for the buyer.
4. Execute contract (1-2 weeks)
The agreed upon terms are provided to both parties’ attorneys who will prepare the contract. The seller’s attorney draws up the contract for the buyer’s attorney and the buyer’s attorney will perform due diligence on the property prior to actual contract execution. Once all is agreed upon, the contract is signed and a 10% deposit will be required from the buyer to be held in escrow account of the seller’s attorney.
Buyers must have the deposit in a U.S bank or they will be asked to wire the money to an attorney. Deposits are only refundable under specific conditions such as mortgage contingency which allows a refund if a buyer cannot secure specific terms of financing. A lawyer would have to include a ‘mortgage contingency’ clause in a contract.
Sellers are allowed to keep showing the home and accepting offers until the contract is signed.
5. Apply For Mortgage and Obtain Commitment Letter (6-9 weeks).
Mortgage applications cannot be processed without a signed contract. Consequently, the lender will issue a commitment letter which is a requirement in a board package or condo application if an apartment is being financed. If you are an all cash buyer, you don’t need this process.
6. Submit condo board package to condo board for approval (2 to 4 weeks)
This occurs concurrently with Step 5 above.
In order to buy an apartment in New York, you have to be approved by the board of the building, whether it is a co-op or condo.
A buyer will have to submit documentation to the board, which includes financial statements and references, etc. The condo approval process is really more formality.
Co-ops additionally require interviews, which are very strict and stringently enforced.
7. Schedule Closing (about a week)
The closing occurs weeks after the signing of the contract. At closing, all parties – buyer, seller, banker, attorneys, brokers, will come together at a table. A lot of documentation is signed and all payments are settled (title insurance, fees, taxes, etc.) and funds will be provided to the seller in exchange for the buyer getting legal title to the property and the keys to the NYC home. The deal will be completed at the table and usually no future follow-ups are necessary.
This depends on the bank that is providing the mortgage. Generally, the buyer can assign Power of Attorney (POA) to a representative in New York and hence does not have to be in New York for the closing. The individual assigned the POA can be a lawyer who would be given authority to execute contracts specific to the transaction.
Condo Closing Costs:
When buying a condo, closing costs are approximately 5% of the loan amount. This includes mortgage tax, title insurance, attorney fees, recording taxes, registration, federal/state/city fees, transfer taxes if purchasing a new development, and other administrative expenses. These charges must be at closing. The broker’s commission is paid from the seller’s proceeds.
Foreign buyers are advised to open a United States bank account. When the contract is signed both by the seller and the buyer, you need to either have a 10% deposit in the U.S bank or transfer funds to a seller’s attorney’s escrow account.
Whether one chooses a condo or a co-op, there will be expenses associated with the purchase. The main monthly expenses are taxes, common charges, insurance and depending on whether financing was used, mortgage principal and interest.
New development apartment buildings often have a tax abatement for about 10 years which reduces the monthly tax bill. Without abatement, annual taxes are between 0.5 to 1 percent of property value. Common charges average $1 per square foot per month and goes up or down depending on number of units and amenities. Insurance is about $500 per year.
On the positive side, specific expenses can be deducted from an owner’s taxable income. Real estate taxes, as well as the mortgage interest payment by co-op and condo owners, may be used as a deduction.
On the closing day, you take the title of the deed and become an owner of the apartment. It takes 45 ~ 90 days until closing.
You need a real estate lawyer to ensure that, among other things, the title is good, tax status, there are no liens against the property, and that the deal will close as anticipated and help you understand the purchase contract, including how you will take title on the property.
If you need help finding the right New York real estate attorney or the right appraiser, surveyor, mortgage specialist or any of the other professionals involved in the Manhattan apartment-purchase process, we can connect you to the right people, and we collect no fee from anybody for this kind of service.
For investment purposes, a condo is recommended because of higher appreciation potential and flexibility in renting out. Condos are usually newer buildings and almost all of new constructions are condos.
Co-ops are buildings whereby the apartment buyer buys shares of the building, not the deed. Co-ops require full financial disclosure including previous U.S tax returns and may not be for international buyers. Co-op Boards govern co-op buildings and every purchaser must pass their approval. More importantly, co-ops usually restrict ability to rent out. For example, many co-ops only allow renting 2 years out of every 5 years.
All information is from sources deemed reliable but is subject to errors, omissions, changes in price, prior sale or withdrawal without notice. No representation is made as to the accuracy of any description.