How To Buy An Apartment In New York City

A HOW-TO GUIDE
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An overview

This guide to buying a co-op, condo or townhouse in New York City will help you navigate one of the most complicated and expensive real estate markets in the world. In Brick Underground's typical no-nonsense fashion, we take you through each step of the buying process, imparting insider tips and information that real estate agents may be reluctant or unable to share. Throughout this guide, you'll also find links to dozens of useful articles to further your understanding of the practicalities and nuances of buying real estate in New York City. 

Now, onto step one: Determining whether you, your budget, your finances and your lifestyle are best suited for a co-op, condo, or townhouse.

Ownership structure of co-ops versus condos

n a co-op (short for “cooperative”), the entire building is owned by a single corporation. Instead of a deed, you will receive shares (stock certificates) in the corporation, and a proprietary lease that allows you to occupy a specific unit and lays down the rules and rights much like a lease in a rental building.  In fact, technically speaking, buyers of co-op apartments are referred to as “tenants” or “shareholders,” not “owners," and when legal issues arise, they are decided in accordance with landlord-tenant law, which typically gives co-op shareholders more protections than the laws that apply to condo owners.

Buying a condo is very much like buying a single-family townhouse.  You get a deed to the apartment that gives you ownership of the interior of your unit and the surface of its walls, as well as an undivided interest in the building’s common elements. This is the type of ownership almost everyone has in mind when they think about buying a home.

After you buy your apartment, you will largely find that its legal ownership structure has little impact on your use of it. That said, there are a number of quirks related to each, discussed below.

The power of the board

In a co-op, shareholders elect a volunteer co-op board which (except in some very small buildings that choose to save money by self-managing) works with a property management company to oversee the care and maintenance of the building.

The board also creates and enforces rules about everything from renovation inside units, to what’s allowed to transpire on the roof deck, to whether you can speak on your cell phone in the lobby, or whether (and what kind of) dogs will be allowed in the building. Unlike condo boards, co-ops can even evict an extremely disruptive shareholder and force them to sell their apartment.

Overreaching, power-hungry co-op boards are the stuff of legend here, and some of the stories are true. However, at least as many co-op boards are made up of volunteers with full-time jobs and families who try to make the best of what is a demanding and time-consuming role when one well.

In a condo, individual owners elect a board of directors that perform many of the same functions as a co-op board. Generally speaking, though, most condo boards tend to be more hands-off when it comes to rulemaking.

That slightly more laissez-faire approach is partly due to philosophical underpinnings (more on that below) and partly because condo boards wield less legal enforcement muscle. Yes, the board can fine owners for the expense related to any rule infraction and get a court-ordered injunction to stop it from happening again. But because a condo owner actually owns his or her unit (versus shares in a co-op corporation), a condo board can’t evict an owner from an apartment like a co-op board can.

Note: In both co-op and condos, your voting power increases with the size of your apartment.

Cost comparison: Co-ops vs condos vs townhouses

In New York City, co-ops outnumber condos, with around 70% of the city's housing stock comprised of co-ops. Older buildings (built pre-1980s) tend to be co-ops, while pretty much everything built from the 1980s onward is a condo. 

Co-ops cost about 10% less, on average, than condos of similar location, size and amenities.   Part of the reason is supply and demand: there are simply a lot more co-ops than condos. It’s also a lot easier to buy and sell a condo. Though condo boards may ask for as much financial information as a co-op board, a condo board can only reject a buyer by exercising its right of first refusal to buy the unit instead.  Condo boards are also more investor-friendly than co-ops, which usually require that buyers use the apartment as their primary residence, and place more restrictions on the ability of residents to rent out their apartment.  

On a per-square-foot basis, townhouses cost about the same as co-ops.  Property taxes outside of Manhattan are typically much lower than co-ops or condos, but you’ll need to factor into your expenses the considerable repair and upkeep needed to keep your real estate in tip-top shape.

Minimum downpayment and asset requirements in co-ops vs condos

Most New York City co-ops require buyers to put down 20-25% of the purchase price, about the same as what most lenders require these days.   But the range can be vast, depending on the co-op—anywhere from 10% down (rare) to 50% or more at higher-end buildings.

Co-ops also expect you to have sufficient money left over (also known as the ‘liquid asset’ requirement). Two years worth of mortgage and maintenance charges is about average though the amount can range drastically from building to building--from a few months worth of maintenance payments to 1 to 3 times the purchase price of the apartment. In addition, each co-op will expect you to meet a debt-to-income ratio, usually around 25%-29%. That means your total monthly payments--mortgage and maintenance--cannot exceed the specified percentage of your gross income. An excellent credit score is also required.

Add them all up, and you will find that the average co-op's financial standards are much higher than the average mortgage bank...a primary reason NYC co-ops tend to withstand economic downturns well.

Pro Tip:

Getting ready to buy? Work with a local expert from the brokerage that saves New Yorkers an average of $23,000 per transaction. With Prevu, you’ll pocket a rebate of two-thirds of the commission paid to the buyer’s broker at closing. Click here to learn about Prevu’s Smart Buyer Rebate.

Condos typically require a 20% downpayment, and sometimes as little as 10%. Bear in mind, though, that if you’re getting a mortgage, banks these days often require 20%, unless the building qualifies for an FHA loan, which carries a 3.5% downpayment requirement, or you and the apartment qualify for a SONYMA loan, which has a 3% downpayment.

Many co-op and condo buildings require buyers with ‘borderline’ financial credentials to put an additional one to two years of common charges (condos) or maintenance payments (co-ops) into an escrow account as insurance against nonpayment. The odds of this happening to you increase along with the perceived riskiness of your application, as measured in debt-to-income ratio, U.S. citizenship status, or a variety of other factors. However, unintended legal consequences of New York’s 2019 rent reform laws may be ending this practice for co-ops (not condos).  Instead, you may be asked to provide a guarantor.

Maintenance charges vs. common charges

In a co-op, shareholders pay a monthly maintenance fee. Part of it goes toward the expense of operating the building. The other part is the amount of property taxes apportioned to each shareholder based on the number of shares assigned to their apartment.  Particularly these days, when property taxes and fuel costs are rising sharply, maintenance fees are frequently adjusted upward each year (3% to 7% annual increases are common).

In addition, co-op boards can require shareholders to contribute extra cash from time to time to boost the reserve fund or pay for a specific project.  In a 40-unit building, for example, an assessment to replace an elevator might run $8,000-$15,000 per unit, depending on how many shares you own. Typically, shareholders can spread their payments out over a period of time such as 3 to 18 months.

In a condo, the monthly charges are referred to as common charges. Important: Property taxes are not included in the monthly common charge; individual owners are billed directly by the government. Keep this in mind when comparing carrying costs of co-ops to condos, because at first glance, condos may look cheaper on a monthly basis.

Like co-op boards, condo boards also levy assessments when necessary.

Monthly charges in both co-ops and condos tend to increase with the expansiveness of amenities and staff. However, larger buildings have economies of scale when it comes to staffing and operation that are often reflected in lower common charges.

Estimating your closing costs

Whether you buy a co-op or condo, expect to pay at least  2 to 3 percent of the purchase price in closing costs.  Bump that to 3 to 4 percent if the apartment is over $1 million or you’re buying a condo. If you’re buying a brand new condo, prepare to pay up to 5 percent of the purchase price in closing costs.  For example, if you’re taking out a mortgage for a condo, you will pay a mortgage recording tax of 1.8% of the mortgage amount for loans under $500k or 1.925% for loans above that.  Also, your lender will require you to buy title insurance, which costs about .5% of the purchase price.  

(Note: The New York State legislature is trying to extend the mortgage recording tax to co-op purchases as well.)

On top of that, if you're buying a new condo (versus a resale), you’re also responsible for transfer taxes (1.825% of purchase price for properties over $500,000, and 1.425% for properties under $500,000), though these can often be a point of negotiation with a developer, who is more apt to cover fees like this than reduce the sales price, which can affect future sales.

Getting approved by a co-op or condo board

As a co-op buyer, you usually must be approved by a co-op board made up of your future neighbors  That process involves a mountain of paperwork, a personal interview, the possibility of rejection, and the total (and totally one-sided) opening of your financial kimono to folks you will share the elevator with for years to come. Moreover, a co-op board can turn you down for any lawful reason. And because the reason need not be divulged, this means that in practice, unlawful reasons (race, religion, profession, sexual orientation, nationality, etc.) may also prompt a rejection. (Note: If you buy an apartment directly from the sponsor, you will not need board approval at all.)   

Condo boards also subject buyers to nearly as much financial and personal scrutiny as co-ops do. But condo bylaws don’t permit the board to reject you.  Instead of turning you down, a condo board’s only option is to exercise its “right of first refusal” and buy the apartment itself, which almost never happens.  Instead, pretty much the worst that can happen to a condo buyer is that they wither away on the vine while a condo board engages in deliberate stalling tactics.

Sublet restrictions in a co-op vs condo

Most co-ops have very strict policies about subletting, which does not make them an ideal investment opportunity and can present a serious challenge if your job suddenly relocates to London, for instance. The rules vary, but owners are usually allowed to sublet their apartment for no longer than 1 to 2 years in any 5-7 year period. The board also gets to approve your tenant and charge you a fee for subletting.

Condo sublet policies are far more liberal.  While there may be rules against short-term sublets (say, less than 6 months), there is usually no outside limit nor do boards have the right to turn down a tenant unless they exercise that right of first refusal and lease your apartment themselves. This makes condos ideal if you are looking to buy strictly for investment purposes and rent out your apartment year round. But just like a co-op, the application fees, move-in fees, processing fees, etc., can range from a few hundred to a couple of thousand dollars extra that you or your potential tenant will have to pay. And, if you do make a home in your condo, you will be living in a building with a more transient population than a co-op.

Will you be happier in a co-op--or a condo?

Brace yourself for some sweeping generalizations about lifestyle and other considerations in a New York City co-op versus condo. (Do your research to discover which of these statements actually applies to the building you’re considering.)

  • Condo owners favor freedom and autonomy. Among other things, they don’t want to be told whether they can buy an apartment or to who they can sell or sublet it to; whether they can have a dog (or what kind, or the maximum it can weigh); whether they may refinance or take out a home equity loan, etc.
     
  • Co-op owners are more worried about whether the living environment they think they are buying into will live up to their expectations—and they want to protect it.
     
  • It can be difficult and more expensive to find condos in the most desirable areas such as Central Park West or the best parts of the West Village.  Similarly, if you’re looking for prewar details, these buildings are almost always co-ops--and when you find a rare prewar condo, demand and prices are typically high.

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    Pro Tip:

    If you're not finding enough apartments to view in your target price range or neighborhood, or you want to avoid a bidding war, consider expanding your search to "off-market" listings. NYC real estate brokerage Triplemint uses technology to mine public records and identify owners who may be ready to sell, meaning you can meet and deal with them before their apartments hit the market.

  • For the reasons above, condos may be noisier and filled with a high turnover of renters who don’t care about getting along with the neighbors and may have a greater tendency to neglect the building. Co-ops, while often more peaceful and better tended, can be micromanaged, inbred, and change averse.

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  • Newer condos tend to have more desirable amenities both inside the apartment (washer/dryers, anyone?) and outside (roof decks, playrooms, health-club-quality gyms, etc.) than co-ops and older condos. (That said, many co-ops have been retrofitting some amenities in order to stay competitive...often with mixed results.)

In addition to the generalizations above, you may want to focus your search on condos if:

  • You have a large or feared breed of dog (basis for being rejected from a co-op even if it allows dogs and does not have a stated size or breed restriction)

  • You are looking for a newer building
     
  • You are an investor who wants to rent out your apartment 
     
  • You are buying using a trust or an LLC (though many co-ops have grown more tolerant in recent years)
     
  • You want to use the apartment as a pied a terre
     
  • You are buying the apartment for your kids
     
  • You have sued a landlord or your last co-op or condo board, or you’re generally litigious (or you are an attorney)
     
  • You’re a musician
     
  • You have a home-based business that involves noise or lots of visitors like teaching music or practicing psychology
     
  • You’re a foreign citizen

The pros and cons of buying a townhouse, rowhouse or brownstone

Variously known as townhouses, rowhouses or brownstones--classifications drawn largely from  the material of their facades--these mostly attached single family homes are the quintessential, classic New York City charmer...and the most demanding piece of real estate you will ever own.  

They also don’t come cheap: Plan on spending at least $2 million to $10 million (and up to 5 times that), with wider townhouses priced higher than narrow ones, and location (both the neighborhood and the block composition) playing an outsized role.

Pros:

  • Privacy, privacy, privacy. Plus, you don’t have to worry about being too noisy.
  • Private outdoor space (rear garden and often a roof deck)
  • If your brownstone, townhouse or rowhouse has one or more legal rental units, you can offset your expenses by filling it with a tenant
  • Single family homes are exempt from New York City’s short term rental laws--meaning you are free to Airbnb your place as you see fit.
  • Lower property taxes than co-ops or condos; taxes in Brooklyn & Queens are particularly attractive
  • The only approval you’ll need is from your mortgage bank (unless you’re paying all cash, and then all you need is money). You and your finances will not undergo the scrutiny of a co-op or condo board.
  • More freedom to renovate as you please (no board approvals required), within the limits of building code and, if you’re in a historic district, the rules of the Landmarks Preservation Commission

Cons:

  • Purchase price:  Most buyers simply can’t afford them
  • A very, very, very hands-on investment: With no doorman, super or porter, every household task falls on you (and your bank account)--from trash removal, to boiler maintenance, snow removal, receiving packages, replacing the roof, and much much more.  If you have bandwidth and deep, elastic pockets, this may work for you. Stay away if you’re stretching to buy and need to keep your housing expenses predictable, with no ability to drop, say, $70,000 to fix a deteriorating facade.
  • Elevators are rare, and three or more steep flights of stairs are common
  • Layouts tend to be deep front-to-back, with no windows on the side, so interiors can be sunlight challenged
  • Renovating tends to be much more involved, expensive, and lengthy....especially if your house is located in a historic district.
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Getting a Mortgage

How to get preapproved for a mortgage

Before you start looking for a co-op, condo or townhouse to buy, you’ll need a mortgage pre-approval letter--both to gain a realistic understanding of what you can afford, and to assure a seller that you are a serious, qualified buyer by submitting it when you make an offer.  

The preapproval letter is based on information that you (and your partner if you have one) submit to a mortgage lender or mortgage. The information includes social security numbers, employment details (lenders usually look for two years of continuous employment), proof of income, bank and investment account information and income tax documents.   You’ll typically need to show a debt-to-income ratio--your monthly debt obligations divided by your gross monthly income--of 36% or less, with some exceptions. 

Your pre-approval letter is typically good for 60-90 days. Note that it does not guarantee you will be approved for a mortgage.

What a mortgage commitment is--and isn’t

Once your offer on a place is accepted, you’ll need a mortgage commitment letter.  It doesn’t need to be from the same bank that preapproved you. In fact, you’ll want to shop around for rates, and if you’re buying a co-op, make sure you are working with a lender that has a lot of experience with co-ops.  Even better, when you’re buying in a co-op or condo, find a lender who has already approved loans in that particular building, which can expedite your financing, because a lender must approve the building itself, not just you.  They’ll look at things like the percentage of owner-occupied units, upcoming large capital assessments, and the number of owners in arrears on their carrying charges.

To obtain a commitment letter, you’ll submit a lot of financial information, the apartment is appraised, the lender or mortgage broker looks at the building itself to make sure it meets their lending guidelines, and finally they give you a commitment to lend up to X amount by Y date at Z interest rate.

Once upon a time you could go to sleep on that assurance and quit worrying about financing the biggest purchase of your life. These days, the letters are riddled with conditions. Some lenders try to sneak in “subject to appraisal” if they’ve issued the letter before the appraisal or “appraisal subject to underwriting review”—essentially,  these are loopholes inserted by the lender that allow them to walk away from the “commitment.”

Work with your mortgage lender, real estate attorney and real estate agent to make sure you are crystal clear about any possible circumstances--both within and outside of your control--that might prevent you from getting the mortgage.   This is critical if you decide to put in an offer without a mortgage contingency (a frequent necessity in the highly competitive New York City real estate market). By waiving the contingency, you risk losing your deposit if you’re unable to buy the apartment because the financing falls through--a very expensive proposition in New York.

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Working with Real Estate Agents and Attorneys

Do you really need a real estate agent to buy a home in NYC?

The vast majority of NYC homes are represented by a listing agent, while FSBO—or For Sale By Owner—listings are relatively rare in NYC.  A broker’s 5-6% commission is paid by the seller and then typically split with the buyer’s agent if there is one.  

Buyers do not have to pick one real estate broker with whom to work exclusively, nor must they work with one at all. Some choose to fly solo and deal directly with the seller's broker because they believe it gives them an edge in a competitive bidding situation. They theorize that because the seller's broker won't have to split a 5% or 6% commission with a buyer’s broker, the seller's broker may subtly or not so subtly encourage the seller to accept their offer.  In a less competitive market, some buyers choose to work directly with the seller's broker in order to ask the seller's agent to kick in a percentage point of the commission toward the purchase price.

Whether most buyers successfully wrangle that extra percentage point is unclear. Moreover, as this New York Times article explains, working directly with the seller's agent--whose loyalties are divided between buyer and seller--is a bad idea in pretty much every other way. Among other things, you won’t have a real advocate during contract negotiations, and you may not hear about problems with the apartment or the building or resale potential.

Pro Tip:

To reap significant savings while retaining the most vital services of an unbiased buyer’s agent..consider working with a brokerage that will rebate some of its commission if you do some of the legwork on your own. Prevu will handle pretty much everything, including, scheduling viewings, determining comps, preparing the offer, negotiating with the seller, and assembling the board package you’ll need to prove your worth (literally and figuratively) to a co-op or condo board. As a participant in Prevu’s “Smart Buyer” program, you’ll pocket a rebate of two-thirds of the commission paid to the buyer’s broker at closing.  On a $1 million condo with a 6% commission (3% paid to the seller’s broker and 3% to the buyer’s broker), the rebate equals 2% of the purchase price…a not-too-shabby $20,000.

Consider working with a (good) broker if:

  • You're busy. You don’t have the time or inclination to manage your search, including researching available properties and comparables or setting up appointments with agents.
  • You are a first-time buyer.
  • You are new to New York City.
  • You're tired of being outbid, or you're not finding enough available in your price range or ideal neighborhoods  Applying data science to the ultra-competitive world of NYC real estate, at least one brokerage uses technology to intelligently mine publicly available records and make predictive guesses about who may be thinking about selling their place.  Triplemint (a Brick Underground partner) curates these "off-market" listings for buyers, meaning you can meet and deal with apartment owners before their homes hit the market.
  • You are unfamiliar with the neighborhood in which you are looking.
  • There are special circumstances about your qualifications, circumstances or desired apartment that will make your search particularly challenging. As in any business transaction, creative deal structuring can save the day. For example, while many co-ops will not approve a pied a terre purchase by parents who intend for their adult child to live there, some will approve a co-purchase situation in which all parties (parent and child) are on the proprietary lease and stock certificate.
  • You are buying in a difficult co-op: A good broker will be able to determine the likelihood that you will pass the board before you ever make an offer, which will save everyone substantial time, money and heartache.  Also, a good broker will be able to help you craft an application package that caters to the whims of the board so that your chances of being approved are higher.
  • You are buying for investment: A good broker with a solid understanding of investment properties should be able to help you develop your pro forma to model anticipated cash flows, cap rates, internal rates of return, and expected net profits. They will also be able to put you in touch with lenders and property managers that specialize in investment property and help you determine the market value of rents. They may also be able to help with leasing after you buy. (For more detailed info, see "Want to buy an investment apartment to rent out? Here's what you need to know")
  • You are buying from a developer: Unlike the boilerplate contracts typically used for resales, the sponsor/developer drafts their own purchase agreement. That often leaves more issues to be protected against and negotiated that are largely unfamiliar to the typical buyer--necessitating a good broker and a good real estate lawyer.  Your broker should be able to provide you with some industry insight into the building before you submit an offer.

Important note about broker fees: Many buyers visit open houses on their own either while working with a broker (writing the broker’s name on the sign in sheet) or while getting their feet wet before choosing a broker. If you sign in to an open house without a broker, and want to make an offer on the apartment, you usually have the right to bring in your own broker at any time up until an offer is submitted, no matter what the seller’s broker (who now has to split the commission) tells you. There are two important exceptions: If the seller’s broker is not a member of the Real Estate Board of New York (REBNY), which is more common in boroughs outside of Manhattan, they are not obligated to split their fee with another agent (a.k.a. "co-broke"). The same is true in some new developments where the developer's agents are in-house or not REBNY members. In these two circumstances, although you have a legal right to choose an agent to represent you, you may have to pay them yourself.

How to pick the best real estate agent

New York City has around 15,000 licensed real estate agents, but the bar to entry is pretty low, so a license alone is no testament to skill, commitment, or experience.  Below, a few indications that an agent will be an asset to you in your search for a home here:

  • They are intimately familiar with the neighborhood(s) you are looking in
  • They have at least a few year’s experience
  • They are busy, but not so busy that they hand you off to an assistant
  • They work full-time
  • You have a good gut instinct about them (no high-pressure tactics)
  • They have experience with condos, co-ops, new developments, or townhouses (whichever you are focusing on)
  • They seem to understand your taste and sensibilities.

How to find a good real estate lawyer

Once a seller has accepted your offer, you will need a real estate attorney to prepare and negotiate the details of the contract. 

But don’t wait until then to figure out which attorney you plan to work with. There will be a lot of quickly moving pieces and heightened emotions--and you don’t want to rush this.

Here are a few pointers for picking a good closing lawyer:

  • Just about the worst thing you can do is hire an attorney who does not specialize in NYC residential real estate. Do not—repeat, do not—try to save money by dragging Uncle Morty away from his trusts & estates practice.  The intricacies of closing a NYC real estate deal—from due diligence on a co-op to reading a condo board minutes—are not taught in law school or dealt with in many other real estate markets.
  • On the other extreme, don’t pick a chop-shop closing lawyer who takes a cookie cutter approach to your transaction and/or is too overloaded to be responsive.
  • If you don’t already know a good closing attorney, ask for referrals from people you know, but be skeptical about referrals from brokers involved in your transaction. These attorneys may be quite competent, but they may also feel the need to help a transaction go through in order to keep getting referrals. This is especially true with referrals by a broker representing a new development, where the potential for future business can be huge.
  • Fees typically range from $1,500 to $3,000 for the average transaction. Expect to pay up to a few thousand more if, for instance, you want to preserve your privacy by buying an apartment under an LLC created for this purpose.
  • Make sure the fee includes due diligence, and that your attorney (not a paralegal) will be going to the managing agent’s office to read the financials and minutes (and read the offering plan if the building is less than 5 years old).  It’s also best practice for your attorney to administer the managing agent questionnaire (about bed bugs, leaks, noise complaints, reserve funds, major capital projects, etc.) in person or over the phone.   (As one closing attorney told us, “They have a duty to the building but generally they don’t want to lie. You can tell if they’re trying to avoid something.”)
  • Find out how much of the attorney’s fees are refundable if the deal doesn’t go through.
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Selecting the Right Co-op or Condo Building

Questions to ask about the building before you buy a co-op or condo

Living happily ever after in a New York City apartment has as much to do with the building you live in as the unit you buy.   That’s a lesson first-time buyers and people new to NYC generally wind up learning the hard way--falling for the view and living to regret the high carrying costs (or the high-maintenance co-op board!).   Especially if it's your first time, you may not be sensitive to all the ways buildings diverge--from service and financial health, to flood zone location to sublet policies.

Issues like the ones above and below are not necessarily deal breakers, but it’s good to think about them in advance to identify the ones that might be:

1. Elevators: Are there enough elevators to accommodate the number of residents, especially during rush hour or during a one-passenger-at-a time pandemic? In a tall building, are all of the elevators “local” or is there an express option to speed things up? Having to wait 10 minutes every single day for an elevator during rush hour can really crimp your happily-ever after.

2. Sublet policy: What restrictions are there on your ability to rent out the apartment? Are there any fees?

3. Heat and a/c:  If the heat and air conditioning are centrally controlled, what time of year does the building switch over? (You could be poaching/freezing for weeks.)

4. Food delivery: Can meals be delivered to your door or do you have to go down to the lobby to get them? Are there enough restaurants that deliver to the building? (Check restaurant-delivery website Seamless.)

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5. Package delivery: In recent years, the explosion of grocery delivery services, meal delivery services, Amazon shopping and all other forms of online shopping have severely strained the ability of even full-service doorman buildings to store and/or deliver to residents. Some have banned certain types of delivery altogether, so be sure to inquire.

6. Amenities: Are all of the amenities included, or are there some pay-to-play options? 

7. Board personality: Is the board easygoing or strict? (For clues, ask to see a copy of the house rules.) A board's personality will influence your day-to-day existence and can even affect resale values.

8. Flood and evacuation zones: Post-Hurricane Sandy, it's important to be aware of your building's vulnerability to flooding.  Find out whether the building was affected by Hurricane Sandy. If it was, you and your attorney need to make sure the damage was fixed properly, by professionals, and find out how the building will address vulnerabilities going forward (and how much your share of that will cost).  

You should also check to see if it lies in a FEMA-designated flood zone.  If it is, you will need to be prepared for the possibility of future disruption and if you are taking out a mortgage, you may need to buy flood insurance on your apartment, even if it's on the 15th floor.  

Finally, determine whether your building lies in a NYC flood evacuation zone.  There are no insurance consequences to being inside a NYC evacuation zone, but you may be ordered to evacuate in another severe storm.  

9. Bed bugs: Has the building had a bed bug problem within the past year, how was it handled, and what is the status? Red flags include a longterm problem (6 months or longer); an infestation that is centralized in the apartment of a 'hoarder', notoriously difficult to control or even gain access to; a recent bed bug problem in your own unit, or any unit in an adjacent cloverleaf pattern (above, below, beside your prospective apartment).

10. Dogs: Even if you don’t want one now, does the building allow dogs? If so, are there any restrictions on number, breed or size?  Will you need to pay a fee to keep a dog, use the service elevator or even carry your dog through the lobby? If, on the other hand, you prefer to live in a no-dog building, recognize that the proliferation of "emotional support pets" has introduced dogs to many no-dog buildings in recent years.

11. Washer/dryer rules: If your apartment doesn’t already have one, may you install a washer/dryer? (Don't take the seller or broker's word on this, and beware of any answers to your renovation questions that include the words “the board approves this on a case-by-case basis.”)

12. Neighborhood nuisances: Are there any nuisances on the block, such as a nightclub that gets going at midnight every night, or a restaurant that exhausts cooking smells into your apartment? (Come back and check at the appropriate time of day.)

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13. Smoking policy: It's not just restaurants, bars, and public parks that are smoke free these days: More and more buildings have declared smoking off-limits inside apartments, not just within the public spaces of the building. 

14. Schools: What public elementary schools are in your zone, and are they considered “good”? Even if you don’t have kids, your next buyer may care. Fair Housing Laws preclude your real estate agent from discussing schools, but you can investigate on websites like InsideSchools.org and GreatSchools.org and stop by the local playground to ask a few a parents about the schools and any scuttlebutt about future rezoning initiatives.

Before you sign any papers committing you to a new apartment, confirm and reconfirm that the building is in the school zone you think it is. In theory, you can find out which school a building is zoned for by calling 311 or checking the Department of Education website but due to continual rezoning, this information has not always been accurate.  We suggest calling the school principal's office to  confirm that your building falls in that school's zone.

15. Your future neighbors: What kind of people live in the building? Fair Housing Laws prevent your agent from talking about the presence of families, retirees, or post-grad party animals—so ask the doorman and/or sit outside the building to watch who comes and goes.

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16. Family-friendly vs not: Life with small children can be much easier in a building that is truly "friendly" to families, and parent friends (and potential playdate partners) in the same building are a major plus. On the other hand, if you're single or your kids are all grown up, you may not want to live next door or beneath young children.  Brokers aren't allowed to discuss the composition of the building, but the doorman or super can.  Other tips: Sit in the lobby or outside the building and look for yourself, particularly before and after school.  If there's a bike room, look for little bikes. Buildings with up-to-date playrooms and those with predominantly larger (2+ bedroom) apartments tend to have more families, particularly in highly regarded school zones.

17. Odors and secondhand smoke: Be alert to any objectionable odors, ranging from cigarette or pot smoke to cat pee to strong cooking smells and make sure they are something you can live with.

18. Sponsor control: If more than 50% of the apartments are owned by the developer or sponsor, you and your neighbors will not be able to make key decisions about the biggest investment in your life until the sponsor owns a minority stake and residents take control of the board.  There may also be issues with financing: Banks are reluctant to issue mortgages in buildings with high investor or sponsor ownership, meaning you may have to pay all-cash--and resale values may be depressed because the pool of potential (all-cash) buyers is small.

19. Trash disposal: How is garbage disposed of—for example, can you leave it on the service stairs for pickup or do you have to bring it down to the basement yourself?

20. Stroller policy: Are strollers allowed in the elevator or relegated to the service elevator? 

21. Financial health: After your offer is accepted, a good real estate attorney will conduct a thorough analysis of your prospective building’s financial situation. (Remember, we mean a good attorney; if you pick one unfamiliar with NYC real estate, or who runs an assembly-line chop-shop practice,  or who receives a steady stream of referrals from someone who stands to gain from your sale--such as a broker or developer--your attorney may not give this critical process the attention it needs.) If a building hasn’t raised its monthly charges in years, this is likely a sign of bad management in that important projects are probably being deferred.  Similarly, while some higher-end buildings make a practice of “running lean” and levying assessments for emergencies and improvement projects, a reserve fund of less than 3 months may mean this building is struggling.

A brief guide to NYC apartment buildings--white glove, prewar, postwar and more

Before you start shopping, it's wise to master the lexicon and the nuances of the various types of apartment buildings in New York City.

'Full service' and 'white-glove' vs plain old ‘doorman’ buildings:  A doorman building may sound fancy, but it can be as no-frills as a part-time doorman building with a live-in super. 'Full-service' implies all the trimmings you would expect such as porters, a resident manager, and possibly a concierge in addition to round-the-clock doormen. A truly 'white glove'  building is full-service with a five-star-hotel level of service and cleanliness. 

Your monthly charges will reflect the level of staffing, and generally speaking, there is an economy of scale: It can cost less per apartment to staff a 300-unit full-service building than it does to staff a 125-unit building.  Holiday tips in a full-service building can range from $1,000-2,500 per year, though there is no obligation to tip.

“Attended elevator” buildings: This is a rapidly dying breed of smaller prewar buildings that still feature old-fashioned manually-operated elevators. The elevator is operated by a uniformed attendant who functions as a doorman when not ferrying passengers. However, there is not a separate doorman, so package acceptance and other types of duties cannot be reliably carried out at all times, with the attendant toggling back and forth between the front door and the elevator.

We can’t really think of an upside to this arrangement (besides delaying the cost of upgrading the elevator).   All things being equal, we’d rather have a doorman.

Elevator buildings: Compared to luxury full-service buildings, these are generally on the smaller side, topping out at around 10-15 stories.   At most, they are staffed with a live-in super and maybe a part-time porter/handyman to help out.

Many people swear they would never live in a non-doorman building, citing safety and convenience. Others find that a good live-in super who accepts packages is an excellent trade off for increased privacy and significantly lower monthly charges.  These days there are also sophisticated remote doorman systems that can perform many of the functions of a traditional doorman.

Walk-ups: These four-, five- or even six-story buildings are usually very competitive pricewise. Many if not most rely on help from a part-time off-site super, and some require that owners take up some duties usually performed by a super, such as shoveling snow.

Prewar vs postwar vs new:

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Prewar buildings were built before World War II and generally but not always embody the elegant, iconic architectural styles associated with “old” New York.  On the positive side, they tend to be very solidly constructed (resulting in less sound transmission between apartments, except in tenement-style apartments and brownstones) with more gracious proportions, from room size to closet size to ceiling height.  

On the negative side, prewar buildings tend to have fewer amenities (gyms, playrooms, swimming pools and the like), and unlike the newest crop of construction, comparatively few allow in-unit washer dryers, though there is some progress being made on that point as prewar buildings revisit plumbing issues to try to remain competitive.  Due to their older vintage, most prewars are co-ops rather than condos.

Postwar buildings basically span the period from World War II up until the circa-2000 construction boom.  These buildings include the huge middle-class housing projects like Stuyvesant Town, to the 60s-era white-brick high-rises plentiful on the Upper East Side east of Lexington Avenue, to red-brick cookie cutter construction that characterizes much of the 1980s construction.  

While there are exceptions, the cookie-cutter nature and lack of architectural detail of many of these buildings can make them a more affordable option than prewar or the newest construction.   They are likely to have amenities like laundry rooms and fitness centers, and their windows, bathrooms, and elevators are often larger than prewar, but many are also known for their low ceilings and slapdash construction that shows up in noise-transmitting walls and floors.

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New construction buildings born in this millenium tend to lavish much attention on style and design.  Hallmarks include an emphasis on floor-to-ceiling windows, open kitchens, and amenity spaces that can range from full-service gyms and screening rooms to pet spas, landscaped roof terraces and children’s playrooms with a full schedule of classes and activities.  Many units were designed to accommodate washer-dryers.

All of this comes at a cost:  The sense of spaciousness provided by huge windows and open kitchens allow developers to shave actual square feet from living areas. Amenities boost the common charges.  Many newer buildings (1-3 years) are still experiencing growing pains related to construction defects and sponsor control that is not always in the best interest of residents. Depending on the developer, noise transmission and air quality issues can also be a problem. Newer buildings may be less conveniently located than older housing stock. Also, because they are condos with characteristically lax sublet rules (unlike co-ops), and because they attract investors who never intend to live there year round, newer buildings can have a higher proportion of renters than some live-in owners are comfortable with.

NEXT SECTION:

Choosing the Right Apartment or Townhouse to Buy

Tips for navigating open houses and in-person tours

Until the Covid-19 pandemic, Sunday afternoon open houses were an excellent way for buyers to become familiar with the buildings and apartments in their price point in a particular neighborhood.   For public health reasons, traditional in-person open houses will likely not resume until the Covid health threat ends, replaced by “by appointment” open houses. You’ll typically have to demonstrated serious interest along with your financial qualifications, which may include providing the listing agent with mortgage pre-approval letter and a financial disclosure form.  

Once you’re inside:

  • Walk through the apartment or townhouse as if you live in it, thinking about your daily routine. Do not assume that you can change something, like expand the bathroom or add a washer-dryer. Could you live with it the way it is?
  • Don't take the broker's word for anything--from claims that there are already offers, to the cost of existing renovations or future ones, to the seller's reason for moving. Ask for documentation on issues like these--you probably won't get it, but the broker's reaction can tell you a lot. At an open house, you may find that brokers let their guard down more toward the end.
  • Is it big enough? Because of the high transaction costs involved in buying and selling in New York City, you should buy a home with room to grow over the next 5-7 years. So if you're newly married and planning for children, you may want to keep renting rather than buy a one-bedroom starter apartment.

Do not rely on anyone's claims about square footage. Bring your own tape measure and run the numbers yourself.

Common co-op & condo building troublespots

Even within a building, the real estate maxim "location, location, location" holds true. Here's a quick tour of things to consider that may affect the value of an apartment and/or your enjoyment of it:

Ground floor: Be wary of noise from the street (if the apartment faces the street) and the lobby. Moreover, sound travels in two directions, so realize that people in the lobby can hear you too. Mechanical equipment in the basement can produce noise, vibrations and odors; a boiler beneath your apartment can keep your place uncomfortably warm; and if you have a garage downstairs, be prepared for gas fumes from idling cars. (Vermin coming up from the basement can also be problem.)

Ground floor apartments often have window bars for safety and can be quite dark. On top of that, if you're facing the street, you may be keeping your blinds drawn much of the day for privacy. 

On the bright side, ground floor apartments in the rear of the building might come with outdoor space. And ground floor apartments can be a bargain. In an elevator building, they typically sell for 10 to 20 percent less than a second floor unit and 15 to 25% less than units above the second floor. (The opposite is true in a walk-up building, where apartments nearest the street sell for the most money.) Common charges or maintenance charges, which typically increase with floor height, are also the lowest in the building. Parents of young, active children may also appreciate living on the ground floor as there are no downstairs neighbors to mind the noise of jumping feet and crashing toys.

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Next to an elevator shaft or trash chute: Elevators can send vibrations into neighboring apartments. Noise is also sometimes a problem in the form of rattling elevator cables and the chatter of neighbors waiting for the elevator (who are also privy to sounds coming from your apartment).

Trash chutes can also produce vibrations and in newer buildings some residents complain they can hear trash as it falls down the shaft, as well as the slamming door of the compactor room as residents drop off their trash.

Directly below a roof or setback terrace: All roofs leak eventually, and it can take months or years to find the source.  Living under a terrace or roofdeck--particularly an actively used one--can be noisy as well.

The tradeoff of living on a high floor--views, light and not hearing noise from upstairs neighbors (or only occasionally if there is a terrace)--may be worth the drawbacks. At a minimum though, get an inspector in to look for potential leaks and make sure your attorney hones in on the issue in his or her due diligence.

Down the hall from a community room or playroom: Foot traffic and noise from the room itself can be a problem.

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Along an airshaft: You won't get much light shining through windows that border an airshaft and you will probably want to further obscure the view and potentially prying eyes with window treatments. However, air shafts can make lovely quiet neighbors; just make sure the neighboring buildings that share the shaft are residential--you don't want a restaurant dumping garbage into the shaftway next to you.

Adjacent to an upper-floor mechanical room: These rooms can house boilers, a/c equipment, pumps and other devices that can produce noise, heat, or vibrations.

Very, very high up: Living on the 30th, 50th or 70th floor of a sleek high rise is a dream come true for many. But life is a little different when lived among the clouds, so go in with your eyes open by reading The Ups and Downs of Sky High Living.

Weighing rent-to-own programs

Sluggish condo sales during the Covid pandemic have prompted a growing number of developers to roll out rent-to-own programs in which some or all of your rent over a certain period of time--typically 6-12 months--is applied to a pre-negotiated purchase price. It's an option worth considering in a market where it's cheaper to own than rent, though keep in mind that the option usually is presented only on an apartment that's taking too long to sell or a new development where the developer is anxious to move a lot of apartments, so due diligence is key.

You might consider a rent-to-own deal if you have a stable job with rising income but you're 1-2 years from being able to afford the apartment you want, or you need to build up your credit history in order to get a mortgage, or you want to kick the tires of a new-construction condo to make sure it isn't riddled with construction defects.

A few things to remember about rent-to-own deals:

  • Rents are often higher than market-rate
  • If you're planning to get a mortgage, you'll only be able to apply the portion of the rent that is above market-rate rent toward the down payment. The rest can be applied to closing costs and the purchase price.
  • Terms vary greatly. Get a lawyer to review your contract to purchase, make sure it's valid and binding, and help negotiate fair terms. Negotiate all the terms of the purchase now, when you have the most leverage, not when it's time to buy a year from now.
  • You may be obligated to make repairs instead of your landlord.
  • Be wary of a contract that obligates you to buy, and make sure your purchase agreement includes a financing contingency in case you can't get a mortgage.
  • In a co-op, make sure the board approves the contract and you as a purchaser so that you don't get rejected after a year of rent payments.

Why buying a co-op directly from the sponsor may be worth every extra penny

A sponsor co-op apartment is one that is owned by a building's original owner or the corporation responsible for converting the building from a rental into a co-op.

The big advantage of a sponsor co-op--and the reason they are so sought-after--is that buyers do not have to be approved by the co-op board. You may even get to bypass the building's normal downpayment and reserve requirements, and be grandfathered in on certain perks held by the sponsor such as rights to a storage unit or to install a washer-dryer.

Sponsor apartments tend to cost about 5-10% more than comparable non-sponsor units, but for many people who might not be approved by a co-op board (such as freelancers, foreign citizens, and the unemployed or retired) the alternative is buying a condo, which is much more expensive on average than a co-op.

Closing costs are higher for sponsor units, as city and state transfer taxes are paid by buyers. Also beware of the "sponsor renovation" -- often a low-cost quickie renovation meant to spur a quick, high sale and emphasizing surface appeal over quality and longevity.

Lot-line windows and “two bedrooms” that are not

If you're a first-time buyer--or even a second time buyer--there are a couple of concepts that you should be familiar with in case you run across them.

Lot-line windows: Not all the windows in an apartment are necessarily there forever. Lot-line windows, which face onto the 'lot line' or invisible property line between two buildings, are at risk of being bricked up, at your expense, if the adjacent property is built up.

How can you tell if a window a lot-line one? Very often they look a little bit different--with wire visible in the glass itself. But that's not always true. If you're buying a newer apartment it will probably be disclosed in the offering plan. Real estate agents must disclose the presence of a lot line window but only if they're aware of it, so make sure your attorney confirms that no windows in your prospective apartment are lot line windows.

Usually lot line windows are 'secondary' windows are on the side of apartments--never in the front and rarely in the back. For more information on the impact to the value of an apartment--even before the window is bricked up--read this.

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A home office/den is not a legal bedroom: Legally speaking, a bedroom must have a window. Yet you will still run across apartment listings for "two-bedroom" apartments consisting of one legal bedroom and a windowless home office/den.

Many apartment dwellers do, in fact, use windowless rooms as bedrooms, even though it's illegal.

As one real estate attorney told us, "Child Protective Services will not come knocking at your door if you make [this room] into a nursery or kid's room." And many adults like them for their cocoon-like, blackout-quality peace and quiet.

However you decide to use the space, don't be persuaded to pay as much as you would for a legal bedroom: Depending on the strength of the market, a windowless room is worth about 30-50% less than a legal bedroom, say real estate brokers and appraisers.

Some advice for investors

If you're buying an apartment as an investment and intend to rent it out or only reside there part time, you will need to focus your search on condos, as very few co-ops welcome non-resident buyers and almost all severely restrict the ability of owners to rent out their apartments.

  • Work with a broker who is experienced in investment sales 
  • Buy an apartment with the widest appeal to renters--one or two bedrooms tend to rent the fastest. That said, the larger apartments may have less turnover, as they tend to rent to families who stay put longer. More than one bathroom is a major plus.
  • For less risk (and potentially lower upside), focus on prime, established neighborhoods. In Manhattan, these include Midtown East, Tribeca, Soho, the West Village, the Upper East and West Sides. 
  • Work with a local attorney who is familiar with New York City’s changing rental laws, which went through a major update in 2019 affecting both rent-stabilized and market-rate apartments, with more changes likely on the horizon in coming years

Tips for buying a townhouse, brownstone or rowhouse

  • Work with a broker who specializes in these houses
  • Check the Certificate of Occupancy to confirm it is designated for single-family occupancy. If you’re planning to use it as a single family home, easier and less expensive to buy a townhouse already certified for single-family occupancy versus converting a multi-family property to a single family home
  • If you plan to rent it out, get in depth tax advice
  • Become very familiar with the all-in costs of buying, renovating and owning a townhouse along with laws you’ll need to follow eg snow removal and facade maintenance, and any historic district restrictions on renovation 
  • Get a title search
  • Have it inspected by an inspector experienced with brownstones 
  • Make your offer contingent on inspection
NEXT SECTION:

Buying a New Construction Condo

Finding a reputable developer

It's easy to be seduced by the obvious charms of a brand new condo--falling for sleek, modern architecture, floor to ceiling windows that make the most of light and views, and building amenities perfectly attuned to the needs of modern-day living versus, say, the needs of New Yorkers in 1926.

Just don't confuse new with perfect.  Construction defects ranging from minor to serious are not uncommon. They can cramp your quality of life for years and even interfere with your ability to sell until the issues are fixed.

The most frequent problems involve exterior leaks, windows that don’t work, defective wood floors, inferior substitutions of materials and appliances, missing fire proofing, heating and cooling system problems, and bad ventilation.

Complications ensue if the developer (also referred to as a 'sponsor') either doesn’t want to fix a project he doesn’t stand to make any more money on, or can’t afford to.  Worst case translation: Two to three years of lawsuits, five- or even six-figure assessments, mild-to-severe inconvenience, and repair work that could wind up costing each owner tens of thousands of dollars.

While buyers of brand-new will never be able to eliminate the prospect of construction defects, the best hedge is to buy from a reputable developer—one who not only builds to a greater standard of care, but can afford to fix things that go wrong and wants to in order to preserve its reputation and be able to sell future projects.

So how do you find the good ones? A good real estate attorney (not one referred to you by the developer) should be able to steer you away from the worst and recite a list of the best.

You should also Google the name of the developer for discussions about problems in past projects. Remember that many developers create a new LLC for each project, so look in the development’s offering plan—a huge telephone-book-sized document that along with its amendments essentially explains everything about the building, from how many units have to sell in order for the sponsor to relinquish management of the building right down to the finish of the countertop in the powder room. Conduct your own due diligence online with this step-by-step guide to researching a developer’s past projects.

Tips for buying a ‘preconstruction’ condo

The main advantage of buying a condo before construction begins is taking advantage of what is typically lower early-bird pricing: Developers release units for sale in several batches, raising prices each time. The spread between the first group and the last is usually 5 to 20%.

Note, however, that while you may get a cheaper apartment if buy early, you won’t necessarily get a better one. Sponsors include a number of the most desirable units in each new batch of units and often save the best for last, when they expect to receive the highest price.

Buying “pre construction” means relying on renderings, which may be deliberately distorted. The sponsor is only legally obligated to deliver what’s specified in the offering plan; the pretty pictures are irrelevant, and so is the model apartment.

When looking a rendering, keep in mind:

  • Views can be misleading: The view from your apartment may vary because it’s located in a different spot or because the building across the street was photoshopped out.  Also check that the view from the roofdeck matches the rendering.
  • That plasma tv above the fireplace looks nice, but is the electric and cable in that location and at a raised height, or will you have to rip out a wall to put it there?  For that matter, is there actually a fireplace in your apartment?
  • If the rendering shows moldings, are they included or upgrades?  As far as those beautifully painted walls, understand that yours will be supplied white—maybe just a basecoat of white at that.
  • Is the marble countertop standard or upgraded?
  • Ceilings often seem higher than they actually are, perhaps because a soffit makes it seem that way in combination with a lot of modern, low-slung furniture. 
  • The clean, modern looking living room may neglect to show your heating and cooling paraphernalia – for example, the under-the-window PTAC unit.
  • Decorative items in the kitchen will probably not be making an appearance in your apartment. Similarly, built-in shower niches may be an aftermarket extra or not available at all.
  • Make sure the exterior of the building is depicted in its natural habitat and with the actual façade material, storefront and awning that will be in place when the building is completed.
  • Amenities are frequently depicted, er, generously. Check the exact size and finishes of all spaces, including roofdeck, lobby, gym and pool. That six-lane Olympic swimming pool in the brochure may bear little resemblance the 1-2 lane lap pool described in the offering plan.
  • The lobby might be rendered with a doorman or concierge…but it is the staff full-time or part time? Is the lobby furniture going to be supplied or will the condo board be expected to do that?

There are a host of other risks you should seek to minimize if you buy a preconstruction condo. For a deeper understanding and a checklist of questions you and your lawyer should get answers to, see How to Buy Preconstruction Smart.

How to negotiate with a developer

Unlike individual sellers, developers (also referred to as sponsors) generally tend to avoid outright price reductions. Price cuts affect future sales, as each unit’s recorded sale price is a matter of public record. So if the sponsor gives you $25,000 off, they will probably have to give every other buyer in that line $25,000 off. 

Instead, focus on extracting  “off-deed” concessions that the rest of the world will not automatically learn about. You'll find the most negotiability in troubled projects, at critical moments of a development's lifecycle (see below), and/or if you're paying all cash.  "Off-deed" concessions include:

  • 3-12 months of common charges paid in advance
  • Payment of attorneys fees
  • Upgrades to your unit like a better flooring (if not yet installed) or other finishes and appliances
  • Roof rights, rooftop cabanas, storage bins, bike spaces, parking
  • Payment of your contribution to the building’s reserve fund (“capital contribution”)
  • Mortgage recording tax “splitter”: Not many buyers know about this, and it certainly pays to ask, as it can save you the entire amount of your mortgage recording tax (nearly 2% of your mortgage amount)
  • An interest rate "buy-down"
  • Furnishings, particularly when you're buying a model unit
Pro Tip:

To offset the extra closing costs of buying in a new development , work with a brokerage that offers a buyer’s rebate on its commission. With Prevu, you’ll receive a rebate of two-thirds of the commission paid to the buyer’s broker at closing.  On a $1.5 million condo, you’d pocket up to $30,000. Click here to learn about Prevu’s Smart Buyer Rebate.

In some cases, you may have more leverage at the beginning and end of a project. That’s because during the preconstruction phase, the sponsor will be focused on getting 15% of the units under contract. Fifteen percent is the magic number at which the offering plan is declared effective by the attorney general and closings can legally begin. It is also the minimum threshold at which most lenders will even consider financing sales in the building (some want to see as many as 50% of the units under contract). 

If you're paying all cash in the preconstruction phase, you may have the most negotiating leverage of all as far as concessions, if not purchase price.

Conversely, you may have extra leverage at the very end of the project, when a sponsor may be eager to close down the sales office and focus fully on the next project.

Other points of negotiation:

  • Deposit amount: Most sponsors ask for 10% down when you sign the contract, but in the preconstruction phase, when the sponsor is eager to hit the 15% mark described above—and is likely to be sitting on your deposit a very long time before delivering the unit—you may be able to negotiate a lower amount, such as 5%.
  • Drop dead dates: Sponsors will never offer this up, but most will agree to a reasonable “drop dead” date at which point you are let out of the contract.  For example, if you’re signing a contract in August and the sponsor predicts closings will start Oct. 1st when the building is predicted to be 25% sold, you can ask to be let out of the contract if closings are delayed 3-4 months past Oct. 1st.

Getting a mortgage on a brand new condo

In the skittish modern credit climate, lenders look as closely at the building as at your financial history and income in deciding whether to give you a mortgage.

Building-wise, lenders require that anywhere from 15% to 50% of the apartments in the building must be in contract. The exact percentage is up to the lender, and so-called “preferred” lenders are typically at the lower end of this range.  Preferred lenders, named in the offering plan, become intimately familiar with the development and don’t have to start from scratch as an outside lender might.  This minimizes the possibility of the loan being denied because of issues with the building though it doesn't rule it out; the lender may decide at some point to put a cap on the number of units it is willing to finance, for instance.

Before issuing a mortgage to a buyer, lenders also require that the building have a Certificate of Occupancy or Temporary Certificate of Occupancy issued by the Department of Buildings.

Most lenders require that you put at least 10% down on your new condo; the average is around 10-20%.  If your building is FHA-approved (more and more common in many emerging Brooklyn neighborhoods, for instance), you will only need to put 3.5% down.

Understanding property tax abatements

Though less common than in years past, some new buildings offer property tax abatements that range from 5 to 25 years, meaning that you will owe no property tax or only a specified fraction each year until the program expires and you rejoin the highly taxed herd.

A few points about abatements:

  • Make sure you understand the phasing-in schedule:  You may owe zero taxes for 10 years, then 25% of “normal” taxes in year 11, 50% in year 12 etc.  A rapid phase-in can be a financial shock.
  • Make sure you have a realistic sense of your actual tax burden once the abatement expires.  Understand that the dizzyingly high number that the offering plan says will be your tax at the expiration of your abatement is based on current tax rates and assessed property values.  Your actual number in 7, 14, or 25 years is likely to be much higher as tax rates and assessed values continue their inevitable climb.
  • Don’t assume you are going to sell in Year 7 in the event your income can’t keep up with your taxes. Many of your neighbors may have the same idea—and the competition will make it harder to sell for the price you need.
  • As a general rule of thumb, don’t spend up because you have an abatement: Buy the apartment you could afford if there were no abatement.
NEXT SECTION:

Making an Offer and Going into Contract

How to make a successful offer to buy an apartment or townhouse

When you see a place you like enough to buy, the next step is making an offer, through your agent if you're working with one, or directly to the seller's agent if not. You’ll most likely also be asked to submit the Real Estate Board of New York’s financial disclosure form along with your offer, along with a mortgage preapproval letter.

Typically, the elements of the offer itself are pretty basic. These include price, expected closing date, the amount of the broker’s commission, the percent of the purchase price that will be financed through a mortgage, and whether you are asking for a mortgage contingency and/or a funding contingency. 

Less commonly, the offer may include terms like the right to take possession before closing and pay rent to the seller. Inspection contingencies, which allow buyers to walk away from contracts with their deposits, are not common practice in NYC, but most sellers will agree to an offer that specifies “inspection prior to signing.” That basically means the seller will allow the buyer to have the apartment inspected before signing contract, leaving the buyer room to walk away without signing the contract if an insurmountable problem surfaces. 

When making an offer below the asking price, make sure it’s reasonable and share with the seller the facts that your offer is based on--specific comparable sales, an issue in the building, a change in the economy, etc.  This approach works psychologically by communicating that you’re serious and attempting to be fair, even if the seller does not agree with you.

Another tip: Don’t assume the seller’s broker is going to articulate your position very well. Always give them something (a well reasoned and worded email, comparables pulled from StreetEasy, etc.) that they can cut and paste into an email to help convince the seller.

Here are a few key do's and don'ts:

  • Don't talk too much in front of the seller's agent. You may give the agent reason to believe you can afford more than you initially offer or you might disqualify yourself as a buyer by inadvertently underselling your qualifications. Your own broker, if they're experienced, will be able to best present your net worth statement as even the most educated buyers tend to leave out assets that they didn't realize could be counted.
  • Don't present your best offer first. The other side assumes it isn't your best offer and will keep chipping away, while you've got nothing left to give.
  • Do write an offer letter. Your agent should write a carefully crafted letter on your agent's letterhead (scanned and emailed is fine) explaining your offer and the reasoning behind it, reference supportive information like comparable sales. It communicates sincerity and demonstrates you are probably not making offers on 10 properties at once. And usually the seller's broker will show it to the seller, ensuring that your points will not be lost.
  • Don't ask for everything at once with your first offer. A lowball offer, for instance, is best digested alone.
  • Do be nice. It will get you a lot further than being a jerk, because residential transactions are more emotional. This includes your broker--so make sure you don't select one with an abrasive or bullying personality.
  • Don't blow small things--like who gets the window a/c's--into deal breakers.
  • The bigger your deposit (eg 20 or 25% versus 10%), the more serious your offer will be taken.
  • Offer all cash if you can. In today's topsy-turvy financing world, this eliminates a major element of risk that the transaction won't go through if you can't get financing.

How to win a bidding war

If you find yourself competing for an apartment, here are a few things to keep in mind:

  • Offer all cash if you can. If not, consider waiving the mortgage contingency to compete with a cash offer, if you haven’t already.
  • Act interested. Wouldn't you rather sell your home to someone who is thrilled with it than someone pointing out flaws or acting blasé because they think enthusiasm will compromise their negotiating leverage?
  • Keep in frequent touch with the listing broker so you know when things change (for example, if another buyer changes their offer to all cash) and you can stay competitive.
  • Most people bid in round numbers. Try making an offer with an odd number, so you'll come in just above a close offer--like $753,000 instead of $750,000.
  • Put a deadline on your offer, like 48 hours, so you'll have a clear idea on when to expect a response. Additionally, the seller may feel more compelled to take your offer.
  • Get personal by writing a letter explaining who you are, your intentions, and why you love the apartment. In a close bidding situation, this may make all the difference to someone who has lived in a place for 15 years and has deep emotional ties to their home.
  • Accommodate a seller's special needs like agreeing to a quick close, buying furniture, or letting the seller stay in the apartment for a period of time after closing.

Going from accepted offer to contract

Once you have an accepted offer in hand, it’s time for your attorney to get busy.  (Note that either you or the seller can walk away from the deal with no penalty until the contract is signed.) Generally speaking, it takes about 10 business days to go from accepted offer to signed contract and another 30 – 75 days  to close depending on whether you’re using financing and the speed with which your lender and the building’s board move.  Of course there are always things that can delay closings even longer.

During this time, if you’re buying a co-op or condo, your attorney will review the last few years worth of minutes and financial statements and ask the managing agent some probing questions, all of which is intended to disclose any pre-existing or potential problems related to everything ranging from finances, bed bugs, leaks, noise complaints, reserve funds, major capital projects, problem neighbors, etc.  As we’ve said before, your attorney will ideally do these things him or herself, rather than dispatch a paralegal, and speak to the managing agent in person or by phone, rather than sending a questionnaire. This is also the time to have an inspection of the property if you choose to do so.

Your attorney will also review the building’s offering plan, bylaws, rules and renovation policies to make sure there are no surprises that might change your mind about buying the place.

When you sign the contract, you’ll typically need to give a deposit of at least 10% of the purchase price held in escrow by the seller’s attorney.

NEXT SECTION:

Getting Approved by a Co-op or Condo Board

The board application

Unless you’re buying a new construction condo or a co-op sold directly by the building’s sponsor, your purchase usually must be approved by the co-op or condo board. This involves submitting a 45-page-long, invasive, much bemoaned application package assembled by you and your broker that includes tax returns, personal and professional recommendation letters, financial statements and much, much more.  Some applications only reach back a couple of years; others go all the way back to the day you graduated from college.

As explained earlier, condos may make you work just as hard as a co-op, but basically have to accept you, unless they exercise their right of first refusal and buy the apartment out from under you. This almost never happens. And in new construction, there is not even an application package.

Pro Tip:

Remember that in addition to financial information and reference letters, your co-op or condo application must include a written insurance quote or active insurance policy—on an apartment you are not even approved to buy yet.  Fortunately, the co-op and condo insurance insurance experts at Gotham Brokerage can provide exactly what you and your board need in a fraction of a business day.  They’ll also swiftly accommodate any changes (for example, if your closing is delayed), and fully refund any policy costs if you don’t complete your purchase for any reason. Click here to get started.

There are also a couple of situations in which a co-op cannot reject you:

  • “Cond-ops” A few buildings (sometimes referred to as “cond-ops” for their condo-like approvals power) are actually forbidden by their own bylaws from turning down a buyer who satisfies basic conditions for buying .
  • Sponsor sales If you buy a co-op directly from the sponsor, you will not need to be approved by the board. For more about sponsor apartments, read our guide.  

The vast majority of rejections occur before the co-op board interview, based solely on your application.

Co-op boards do not have to explain why they rejected you. So although, legally, they must abide by Fair Housing Laws and not discriminate on the basis of race, religion, family status, etc., the fact is that anything can and probably does happen behind closed doors and sealed lips.

The possible and not always obvious reasons (most legal, some not) for rejection based on your application include:

  • The size, breed, temperament, etc., of your dog.
  • The board suspects you plan to use the apartment as a pied a terre rather than your primary residence.
  • You are buying the place for your grown kids.
  • You need a guarantor to afford the apartment.
  • You won’t have enough cash left over after buying the apartment to meet “liquid reserve” requirements, which can range from $25,000 all the way up to 1x to 3x the purchase price of the apartment.
  • You don’t have a strong enough presence in the United States (where will they sue and collect money if you default on the maintenance).
  • You are a musician (noisy), record producer (like to party), or attorney (litigious).
  • You are an at-home music teacher (noise + lots of visitors) or operate some other objectionable home-based business.
  • You have a history of being litigious and/or suing a former neighbor, board or landlord.
  • You posted stupid pictures of yourself on Facebook that suggest your lifestyle is not an ideal fit.
  • You are paying too little for the apartment (it will drag down property values for the whole building).
  • There are discrepancies in your financial package that have not been adequately explained.
  • Your income relies too much on discretionary bonuses or on commissions.
  • You haven’t been at your current job long enough.  
  • The board members is worried that the price is too low and will hurt the building’s property values (more common in a buyer’s market)

The board interview

As mentioned above, the good news about the co-op board interview is that the vast majority of turndowns--based on a buyer's financial package--occur before an interview takes place. Attorneys have counseled their boards to do this in order to cut down on lawsuits alleging discrimination.

That means that most of the time, if you’ve gotten to the interview, the apartment is yours to lose—something will need to go very awry in the interview.

That said, here are some tips:

  • Don’t answer any questions you’re not asked; give lots of “yes” and “no” answers, resisting the urge to elaborate or sell yourself.
  • Have a copy of your application with you and be familiar enough with it to quickly and concisely answer questions about it without looking (shuffling through papers gives a bad impression).
  • Arrive on time and dress professionally.
  • Couples should decide in advance who will answer certain types of questions (for example, one spouse answers all the financial questions, and the other handles the rest).
  • Don’t ask questions, as they can unintentionally convey negative feelings or intentions such as, “Do you intend to renovate the lobby?” Plus, all your questions should be answered by now as you’ve already agreed to buy the place.
  • During the Covid pandemic, boards turned to virtual co-op board interviews conducted over Zoom or FaceTime.  This means more of your real (personal) life may be on display than you intend, including your taste in decor and the manners of your pet or child should they make an unexpected appearance.   Strategize accordingly.

Short, cordial interviews are generally a good sign. You won’t find out whether you’re approved until later though, usually within a few days.

NEXT SECTION:

The Closing

What to expect at the final walk through

Sometime in the few days before your scheduling closing date, you will do a final walkthrough of your future home with your agent and the listing agent.  

If you’re buying a resale, you should confirm that:

  • Nothing has changed since you last saw the property, including potential damage from movers
  • Any inclusions in the contract (such as window treatments and light fixtures that the seller agreed to leave behind) are actually there
  • Any agreed upon repairs have been made
  • Appliances are in working order
  • All of the electrical outlets work (bring something to plug into each)
  • Toilets and faucets (hot and cold) work

If you’re buying new construction, you’re also checking to see that punch list items have been completed satisfactorily.

What to expect on closing day

Typically, about 60-90 days elapse between the time the seller accepts your offer and the time you actually close on the apartment.

Pre-Covid, closings were typically attended by attorneys for the buyer and the seller, a title company representative, a managing agent if it’s a co-op and probably the brokers for both sides, who have no official function but come to network and pick up their commission checks. While buyers and sellers usually attended,  they could elect to skip it and hand power of attorney to their lawyer.  During the pandemic, many aspects of the closing were moved online, with authorization of virtual notaries by the governor aiding this process. 

Should you close in person, be sure to arrive with your ID and your checkbook, to cover any minor last-minute ‘adjustments’ that spring up. You may also need to provide proof of apartment insurance. Ideally, your closing will last one to two hours, though any number of things like problems with the walk-through, tardy transfers of loan funds, and tardy arrivals of humans can slow things to a crawl.

Eventually, you will walk out with a signed purchase agreement, keys and a great new place to rest your head at night.

Ready, set, search!

Congratulations--you've made it through Brick Underground's guide to buying an apartment in New York City. You've acquired a basic understanding of how the process works (or at least a good shot at being mistaken for someone who does, by someone who might otherwise be inclined to take advantage of you).

Pro Tip:

Ready to get started? Organize your financial records, get preapproved for a mortgage if you'll need one, and optimize your search with the real estate experts at Triplemint.  Whether you're a first time buyer, an investor, retiree, or a parent buying a place for your grown-up child, your Triplemint real estate agent will advocate for your best interests and skilfully navigate the complexities of your particular situation. You'll also be able to tap into Triplemint's "off-market" listing platform, meaning you can meet and deal with apartment owners before their homes hit the market.

Happy hunting!