13 IMPORTANT STEPS TO BUY AN APARTMENT IN NYC

 

Do you want to learn how to buy an apartment in NYC? Is it your five-year goal? Or are you just curious to know what it is like. Either way, you’ve come to the right place.

 

 

I am not a financial advisor or real estate agent and cannot give you professional advice. But I want to share with you my experience about how to buy an apartment in NYC. When I went through the process in late 2021, I googled personal experiences and did not find much online. Those who did talk about their experiences were telling horror stories. Perhaps true, but they were the extremely negative ones to tell. There was nothing in between, so I sort of didn’t know what to expect.

The process is stressful, but I truly believe that the more you know, the more prepared you are and the easier it gets. Let’s break it down.

 

 

This blog post is about how to buy an apartment in NYC. Stick around for the last BONUS point.

 

 

#1 Co-ops vs Condos

Co-ops comprise three fourths of the real estate market in New York City. They have a board, which you will need approval from before purchasing your apartment. They have strict rules about how long or if you can rent your apartment in the first place. They usually have a higher maintenance fee than condos, partially because your property tax is factored into your maintenance fee. They also require 20% down and the board needs to see a robust financial record (24 months of mortgage payments and maintenance fee in liquid form). They are significantly cheaper than condos. There is no hotel vibe here, your neighbors have been there for 20 years and will be there until they sell. It is a place where you can call home. Co-op apartment owners are shareholders (not property owners).

Condos on the other hand, are newer but much more expensive. They are scarce in NYC and harder to find. They do not require 20% down, have lower maintenance fees – however the bank you work with may require a 20% down. They are great investment properties as you can rent your place out and generate income. You do not have to sell if you are going to live somewhere else. But it does not feel like a home. Your neighbors can be short terms renters, your building can have a high turnover of tenants and you can be dealing with a lot of noise (yikes! not for me). Condo owners are property owners (not shareholders). Property tax is paid separately by each owner during tax filing season.

Because the majority of the city’s real estate are co-ops and that is what I have experience with, I will focus on that in this post.

 

 

#2 You Need Capital

While you are setting this goal in your head for your near (or distant) future. you need to save money. This is obviously no small goal to accomplish but there are ways to get here. You can choose to do a 30-year mortgage, which will lower those monthly payments, and you can more easily show funds to the board. It took me several years to get here. Depending on your lifestyle and income, this can vary. But it is not impossible as people make it sound.
You have to account for 20% of your apartment’s price as down payment, and 24 months of mortgage payments and maintenance fee needs to be available in liquid form. So, if you’re apartment is around 600,000 USD, you need 120,000 USD for the down payment. For the monthly payments 1333 USD/ month (mortgage payment) and 1500 USD (maintenance fee), making that 24 months of payments roughly 68,000. You also have to account for a little more than that for closing expenses, but your grand total should be at least 188,000 USD, as an example.

 

 

#3 Start Seeing Apartments Early On

You need to go to open houses and see apartments while you are still in the process of building your financial portfolio. Why? Because waiting until you are financially established is too late. Going to open houses will teach you how much apartments and certain features are going for. So, when you land on something you see yourself living in, you know if it is at or above market price. It is also important to visit different neighborhoods in the city and think about your subway commute for work and where you see yourself living.

 

 

#4 Find Yourself a Real Estate Agent

You can probably go to a real estate company and get one assigned. But I think recommendations from people you know is important here. One of my colleagues at work had a great experience with a real estate agent, so I contacted her and we worked together really well. Let’s backtrack a little here. Before I met her, I had another real estate agent who I worked with. I found him while I was arranging to see places through a real estate app on my own. We spoke over the phone and I shared what I was looking for (apartment size, features, budget) and timeline (I was in no rush). Over the next months, I got every single listing sent to me that was posted on third party apps, none of those apartments were the type I was looking for, and completely out of my budget. When I turned down opportunities to see them, he made a comment about how we can’t be looking for apartments forever. You can piece the rest together. I share this to say that it is so important to find someone who is invested in you and your preferences. This also depends on the number of clients your real estate agent takes on. When they have a smaller number, they are invested in filtering through and finding you the right place.

 

 

#5 You Will Work With a Team

Feeding off of the last point, another reason why you need a good real estate agent… They will put together a team for you, the mortgage broker and lawyer. The mortgage broker and their team will initially provide you a mortgage approval letter so sellers’ agents will take you seriously when you go see apartments. You will have many back and forth emails with non-stop documents requests throughout the months especially as you get into contract and are close to closing. This is the process. Mortgage brokers can get you better deals because they work with a variety of banks or lenders. If you work with one bank, you get one or two offers. Your work with the lawyer will be mostly before you sign the contract (reviewing the building’s history, finances, board meeting minutes, etc.) and closer to the time of closing. I was lucky to have a stellar team thanks to my agent. They were all very approachable and would take quick calls if I had questions about anything (I realize how lucky I was to do business with them).

 

 

#6 How to Find The Apartment

When you are closer to getting your finances in order, with your mortgage approval letter in hand (metaphorically speaking), you will go around the city looking for apartments. A few important points here. Go see as many apartments as possible, once you land on the one you love, you won’t think twice because you’ve seen enough (kind of like dating – I am serious). Make it a priority and don’t skip visits. I almost texted my real estate agent that I didn’t want to see the apartment I ended up buying.
Another important point, if you are seeing the apartment for the first time on the day of the open house, you are probably too late. Is there a way for you to see this place before some dozens of people who are ready to make an all-cash offer see it? I saw the apartment 4 days before the open house, wrote my offer letter, which my agent submitted. Another point is that you cannot take a passive role and leave the responsibility of finding the apartment to your real estate agent alone. Get involved.

 

 

#7 Offer Letter

So, you’ve found the apartment you’d like to buy. Go home, think about it. Chat with your family, friends, whoever it is their opinion matters to you. Write your offer letter and send it to your agent. Before you hit send make sure you share something about yourself and tell the owners why you really love their apartment – make sure you don’t disclose too much about yourself though. You might say something in the lines of I love that this apartment is close to this (specific) museum because I go there a lot and enjoy my time. Selling a property isn’t just a transaction of goods and money. People get really attached to their homes, and want to pass that to someone who they like something about. Share with them why their place stood out and meant something to you.

While you need to make seeing apartments a priority (as soon as the seller’s agent can show you), you also need to move fast with the paperwork. Write your offer letter and submit it asap if you are confident that this is the apartment for you.

 

 

#8 Signing The Contract

So your offer was accepted? Great. Next, do not take your sweet time reading the co-op board meeting minutes, co-op rules, and chatting with your lawyer. Do your due diligence (of course), but carve out time and move quick. The seller’s agent is showing this apartment during the open house to some 100 people (maybe), there are people living in the building who become interested in a second unit, and trust me when I say that they will not stop showing it even after your offer is accepted, not until you sign the contract and send the initial down payment of 10% (the other 10% is due at closing). I almost lost my apartment when an all-cash offer was made after my offer was accepted, because I took my time signing the contract (10 days is a lot of time in NYC apparently – who knew?). Almost! Phew

 

 

#9 Gruesome Process

Ok, not exactly gruesome but not the most pleasant part of buying property. After you sign the contract, the next steps include the apartment appraisal, submitting what feels like some thousands of documents to your mortgage broker and parallel to that putting your application together for the co-op board. Your mortgage broker’s team is looking at all aspects relating to your finances (payroll, tax forms, bank account statements, etc). Your building’s board will request similar documents (so a lot of overlap here) but also personal and business references to get to know you. They are looking at you and trying to decide if you are someone they want to have in their building. It is more than just finances. This step can take on average 2-3 months. Somewhere before you interview with the co-op board and get their approval, you will lock the interest rate, which is good for 30 days.

 

 

#10 Interview

You got the interview. That’s usually a sign that your finances were a go for the board (and management company if they have one) and now they want to get to know you. They will ask you questions like how much noise you make, if you play any instruments at home, if you plan on utilizing this apartment as a primary residence, or as a pied-a-terre, or listing it for short term rentals (think Airbnb). Depending on the rules of the building, you know what you’re stepping into, and you will answer accordingly. Airbnb is a usual no-no in NYC co-ops, so you will know what to say. Make sure to be friendly, don’t ask too many questions (I didn’t have any), I answered what I was asked (don’t volunteer information) and got accepted. Just like a job interview, some questions should not be asked (red flag if you are being asked). If you are a couple, it would be a good idea to divvy up who is going to answer what type of questions such as lifestyle vs finances. Many of the questions could be things that you already responded to in your application, the board has read your application, they are just trying to talk to you. Be comfortable with (awkward) moments of silence.

 

 

#11 Official Response

There is really not set time frame on when you hear back. The usual answer is you’re accepted or you’re not. Legally, they do not owe you an explanation, that’s just how it is with co-ops in New York City. I heard back 2 hours after my interview (a day before my Birthday! What a treat).

 

 

#12 Final Walk Through

The owners will remove all their furniture, so you can have the final walk through. This is where you test every light switch, window, faucet, appliances, doorknobs, and doors to see if they are working well. Preferably do this on the day of the closing. Discuss this with you real estate agent, depending on what the issues are, you may get an amount to help cover the expenses of the renovations you’re going to have to do.

 

 

#13 Closing

The seller(s), their lawyer, your mortgage broker, your lawyer, your real estate agent (optional), yourself and the lawyer who is finalizing the purchase of this apartment will meet. These can be emotional and loaded on the sellers’ part, or both parties can be happy to be buying and selling this property. So don’t assume everyone coming that day for the closing is as happy as you are. But this is it! You’ve made it! You are 50 signatures away from walking away with the keys.

 

 

BONUS POINT – Changes effective January 2024

Historically the seller paid their and the buyer’s agent fees for services provided. Starting 2024, that will no longer be the standard. The seller can choose to pay their and the buyer’s agent let’s say 6% of the apartment price (like it was done in the past) OR they can choose to just pay their agent alone 3%. This leaves the buyer’s agent at the mercy of the buyer. So now the buyer has to allocate an additional 3% for their agent, on top of all the expenses they are paying for. They can also choose to pay them less, somewhere between 1-3%.

Moreover, at the beginning of building a relationship with a real estate agent, buyers will have to sign a contract (1) one of exclusivity. The buyer is benefiting from the agent’s services and even if the buyer finds an apartment on their own, they still owe the real estate agent a percentage. This percentage is predetermined. (2) a non-exclusive agreement, the services are provided by the agent, however if the buyer finds a place on their own and only if they do not discuss that with their agent, they do not owe them anything. Kind of like dating, am I right?

This is all very new and fluid, it is changing every day. I think agents with experience and reputation will still be able to protect themselves and get paid. Relationships may start off non-exclusive, but I think sooner rather than later buyers will realize that breaking into the real estate market isn’t easy and you need to be vetted by someone with a reputation and those have a price. Welcome to New York City, friends!

Because I have the best real estate agent, she shared these upcoming changes with me – now go get yourself a great real estate agent so you can call New York City your home!

 

 

Once again, I just wanted to share with you what my experience was like. I also wanted to add that you should trust your gut about the neighborhood, building, apartment, requests you are getting, and the people you are working with. You will know when things are not right. This is new territory but not your first interaction with people, so don’t feel intimidated.

 

 

I hope this helps you in any way and hopefully you too will buy an apartment in NYC (aka the best city in the world)!

 

 

As always, thank you so much for stopping by and reading.

 

See you next week,

Girl on the Upper East Side

 

If you found this interesting, you might enjoy reading about the best museums in NYC.