WHY SHOULD YOU USE A LISTING AGENT?
Selling your home can be an emotional process with scheduling open houses around the clock, dealing with unrealistic buyers, paying for marketing the home to negotiating the price of the home. The listing agent can avoid all that hassle and will work for your best interests in the sale. The listing agent’s responsibility is to get the seller the highest amount of money in the shortest period. Their fiduciary goals and loyalty should be with the seller at all times.
WHY SHOULD I USE A BUYERS AGENT?
Purchasing a home can be emotionally draining, not to mention financially stressful. Many consumers seek independent counsel from a buyer’s agent.
A buyer’s agent works with them for as long as it takes to make a purchase. They teach the buyers the market, show them lots of homes, and eventually advise when it comes time to make an offer and negotiate with the seller. An invaluable resource, a buyer’s agent stands by the buyer’s side for the duration of their home search.
Who pays for the agent?
The seller pays the real estate agent’s commission when the deal closes. The two agents then split the commission. In the case of the dual agent, the agent takes home the entire commission.
PRE-QUALIFICATION VS. PRE-APPROVAL
A mortgage pre-qualification can be useful as an estimate of how much you can afford to spend on your home, but a pre-approval is much more valuable because this means the lender has actually checked your credit and verified your documentation to approve a specific loan amount (usually for a particular time period such as 90 days). Final loan approval occurs when you have an appraisal done and the loan is applied to a particular property.
What is an appraisal? An appraisal is an unbiased professional opinion of a home's value. Appraisals are almost always used in purchase and sale transactions and commonly used in refinance transactions. In a purchase and sale transaction, an appraisal is used to determine whether the home's contract price is appropriate given the home's condition, location, and features.
WHAT IS AN ESCROW ACCOUNT?
Escrow accounts are used in real estate transactions so that the buyer can perform due diligence on his potential acquisition while assuring the seller of its capacity to close on the purchase. The buyer of the property deposits the payment amount for the house in an escrow account
held by a third party. This assures the seller – in the process of allowing the house to be inspected – that the buyer is capable of making payment. Once all of the conditions to the sale are satisfied, the escrow transfers the payment to the seller, and the title is transferred to the buyer.
HOW MUCH (AS A BUYER) DO I NEED TO DEPOSIT IN THE ESCROW ACCOUNT?
In NYC, it’s commonly known to be 10 percent of the purchase price. The deposit is a good-faith gesture to the seller, indicating you’re serious about buying their home. Once deposited, this money can’t be moved or touched without written consent from both buyer and seller.
WHAT IS A COOPERATIVE (CO-OP)?
When you buy a co-op, you don’t actually own your specific unit. Instead, you own shares of a co-op corporation that owns the building. The larger your apartment, the more shares you own within the corporation.
Monthly maintenance fees cover building expenses such as utilities, insurance and staff salaries. Also, instead of receiving individual tax bills from the city, the entire building receives one and therefore, part of the monthly maintenance charge goes towards property taxes.
Pros: The biggest pro is that co-ops are somewhat less expensive than their condo counterparts for a few reasons: They make up about 50 percent of New York’s housing inventory, they require an additional layer of approval and they’re more restrictive with whom they let in. Co-ops have higher owner occupancy rates than condos because most co-op boards frown upon or flat out disallow investors. Because of this, and because co-ops boards rigorously vet potential occupants and have the right to approve or deny each purchase, many believe there is more stability in a co-op.
Cons: Co-op purchasers must endure a more rigorous approval process, including an in-person interview with the building’s board. And, after searching for an apartment for months and going through the approval process, a buyer can be rejected. Foreign buyers can’t purchase because they don’t have the necessary paper trail with U.S. banks, U.S. credit or both. Co-op boards generally require a minimum down payment of at least 20 percent of the purchase price. Some co-op buildings require more (50 percent), while others don’t even allow purchasers to get loans.
WHAT IS A CONDOMINIUM (CONDO)?
Condominiums are “real” properties. Each individual unit has its own deed and its own tax bill. You own it free and clear, though like a condo anywhere, you are subject to the terms, rules, and regulations of the condo board’s governing documents. Monthly common charges cover
building operating costs and management fees that are shared with other condo residents. Taxes are billed separately.
Pros: You own the condo as opposed to owning “shares” like you would in a co-op. This means that you are not subject to approval by the board or the restrictive rules that burden co-ops. Since you own your condo, as opposed to being a member of a corporation, the condo board cannot dictate things like down payment amount, subletting or investor rules. Owning a condo is like owning real estate elsewhere. You own it and you can generally do what you want with your property. However, it is wise for you to review the condo declarations and house rules for the condo you might buy since the fine print could reveal some interesting findings.
Condominiums may be purchased as investment properties and owners generally are free to sublet their units. Because they have no use restrictions, condos are often easier to sell. Most condo boards disallow any rentals of less than 30 days or less than one year. They absolutely frown upon short-term rentals. In some instances when there are too many investors vs. owner occupants, getting a loan can be more difficult. When this happens, some condo boards will disallow non-owner occupiers.
Cons: The flexibility allowed by condos makes them much more desirable and therefore more expensive. What makes them even more expensive is their limited supply and insatiable demand, particularly by foreign buyers who want to own a piece of NYC real estate. Buying a condominium with a loan involves a mortgage recording tax, which is not required when you buy a co-op. Because there are fewer condos available in the New York City real estate market, your options may be limited.
WHAT IS A CONDOP?
While condos and co-ops make up the vast majority of New York City’s multi-family market, it’s possible you’ll encounter something a little different during your home search: a condop. A condop is a co-op that was formed inside of a condo building. At the bottom of the building is often a single condo unit that houses commercial and retail space, which is run under condo rules.
Above, all the residential space is one giant condo unit in which a co-op is formed so that the apartments can be divided via shares among owners. The co-op residents operate primarily under co-op rules, but the co-op must abide by the condo rules and hence both rules are in effect for condop owners. For the most part, condop’s function more like co-ops when it comes to the application and approval process. Condop owners own shares in the building — just like co-op owners — and also pay maintenance fees that include taxes.
Co-Purchasing, Gifting, and Guarantors
What is Purchasing with Assistance?
It can still be difficult for you to buy a home on your own. Some co-ops and condos will permit you to purchase an apartment with assistance in the form of either a co-purchaser, a guarantor or with a bit of help from a gift.
How do these work?
Co-purchasing is someone else buys the apartment with you, so you are both owners of the apartment.
Both of you will have to fill out the purchase application and, if it’s a co-op, you will both have to be present for the board interview.
You are the sole owner of the apartment, but someone else guarantees the payment of the maintenance. If you don’t keep current with payments, the co-op board or condo association can look to this person for payment.
Every building is different, but guarantors can expect to still have to fill out at least a part of the application or the entire application as well. However, they probably won’t be asked to attend the board interview.
If neither of the above options works for you, you can also be “gifted” the down payment amount. This is often a very popular option since the person giving the gift usually does not have to fill out the purchase application.
The person giving the gift often must present a gift letter or affidavit (also generally required by your lender, if obtaining a mortgage) and information regarding the source of funds.
However, many buildings will still require that you, as the purchaser, qualify on your own in order to proceed. In other words, after the down payment, your debt to income ratio and post-closing liquidity must meet their financial qualifications.
Important note – not every building will permit all of the purchase options above. Some might permit one or two, some might permit all of them and some may permit none. That’s why it’s imperative for you to discuss your financial situation with your real estate agent at the very beginning of your search.