Gea Elika's Blog, page 124

Questions to Ask Before Hiring Your Real Estate Attorney

We’ve discussed the importance of a real estate attorney in conducting due diligence. It is important to take a step back to discuss how to approach hiring an attorney. You can rely on your real estate agent for a recommendation, but it is up to you to conduct your own interview and make the final decision on whether or not to bring him/her aboard.

We provide a roadmap to help you in this very important decision.

 

What is his/her specialty?

Unfortunately, real estate may be one of many legal niches he/she practices. Many lawyers have multi-tiered practices and include a hodgepodge of areas, such as real estate, family law, bankruptcy, and personal injury.

Ideally, you want your attorney to focus exclusively on real estate. However, in the event he/she has more than one practice area, you want to make sure your lawyer spends most of his/her time on real estate. You can ask how many real estate clients he/she has versus other areas.

Can you speak to your lawyer directly and are they responsive?

In bigger practices, it is not uncommon for a lawyer to have a support staff. You want to obtain assurances that you can reach your lawyer when an issue comes up. While a lawyer may promise that this is the case and that he/she is always personally involved in all issues, a referral check can quickly let you know if this is the case. You can also ask them if he/she was responsive to questions.

Additionally, you should ask to meet the lawyer’s team.

How much does representation cost?

The attorney’s fee is typically paid at closing. In order to avoid unpleasant surprises, you will want to understand the total cost upfront. Typically, the fee is flat from $1,500 – $3,000, but there are costs involved that get passed on to you. These include basic office and administrative expenses, such as copying and printing. Many lawyers state their fees and costs at the initial discussion, which are agreed upon in writing.

In your interview process, you should find the lawyers’ fees are all in a narrow range. You should approach any outliers with skepticism.

What kind of work can I expect?

The due diligence process in New York City takes on added meaning. Your lawyer needs to examine the building’s financials, board minutes, and offering plan for your co-op or condo purchase. This is on top of the normal contractual work.

Therefore, it is imperative that you ask how much experience he/she has with co-ops/condos, and what his/her process entails.

Other stuff

These are the major issues, but there are still other things to cover. You may have unique circumstances that you will want to ensure your lawyer can handle. In this case, ask if he/she has ever confronted this in the past, and how it was handled.

Final thoughts

Exploring these areas should give you the information you need to make an informed decision. However, do not underestimate your need to feel comfortable discussing things with your lawyer. At the due diligence stage, communication with your lawyer is likely increasing, and you should feel confident in his/her ability to handle the job and that your case is important to him/her.

The post Questions to Ask Before Hiring Your Real Estate Attorney appeared first on | ELIKA Real Estate.

Making Sense of (FAR) Floor Area Ratio in NYC

Have you ever been townhouse hunting in NYC and come across the term Floor Area Ratio or FAR? Most home buyers in New York will never encounter this term and if they do it likely won’t be of much importance. The exception is if they are purchasing a home with the intention of flipping it. If the home is advertising that it has an excess floor area ratio to build, then it can be worth doing a FAR calculation. Savvy developers who want to maximize their profits should pay close attention to it, whether they’re planning to make use of it or not.

 

What is Floor Area Ratio?

The strict definition of FAR is the ratio of the total building floor area to the size of the plot. However, such a definition will fly over the heads of most people, so it helps to simplify it. In layman’s terms, FAR is the total floor area (including all the space covered by the floors in the building) divided by the total area of the land on which the building is set. When you multiply this number by the total area of land available to you, you get the maximum floor area that you can have built on this plot.

For example, if you have 6000 sq. feet of land and the building has just one floor then it has a floor area ratio of one. If the same building has two floors but each floor has just 3000 sq. feet then the floor area is still just one. Its purpose is to serve as a zoning tool to allow developers some creativity in how they wish to build their structures. At the same time, it also limits the total amount of floor space on a lot.

Why is the Floor Area Ratio Important?

Savvy buyers who know how to make the most of FAR can reap big profits. For instance, if you buy a property with extra floor area ratio, you could add extra stories or frontage to the building. This can be very beneficial if you purchase property in a pricey neighborhood with a high average price per square foot. If the building has a lot of excess FAR, it may even be a good idea to tear the building down and build a new one from scratch to maximize FAR.

What if a building has FAR in excess of its maximum limit?

If you encounter a building that has a FAR more than maximum limit it could be in violation of local zoning ordinances. If you notice this in a building you are considering buying, then you should have your lawyer perform a due diligence check. Otherwise, you could find yourself stuck with having to fix the violation out of your pocket.

If you’re in the market for a townhouse, it should already be mandatory to have a home inspection done. This will alert you to any defects such as structural problems, electrical issues or a FAR in excess of its maximum limit.

Anyone who is planning to purchase and flip a property should take note of the floor area ratio. It can either mean profitable renovations or a loss if purchase a property more than its FAR limit. Keep in mind, that even if a property is not using is maximum FAR it still represents value.

The post Making Sense of (FAR) Floor Area Ratio in NYC appeared first on | ELIKA Real Estate.

The Insiders Guide to Buying a Townhouse in NYC

Anyone who’s been shopping for a new home in Manhattan or Brooklyn will have noticed that most of the properties for sale are co-ops and condos. While these types of properties may have a lot of benefits they also have a few downsides such as needing board approval for renovations and restrictions on noise levels. However, there is a third and less common sector of residential properties in NYC – townhouses.

 

 

Gardens, historic details, privacy and numerous bedrooms and bathrooms are just some of the benefits of townhouse living. The Space and flexibility they offer truly make them dream homes for many buyers. However, they also come with a whole new set of responsibilities. You’ll be responsible for salting your icy stoop, taking the garbage to the curb and maintaining your boiler and HVAC. But if it’s privacy and independent living that you’re after they’re probably the best choice in the whole city. This complete guide takes you through every step of the process in buying a townhouse in NYC.

What are the Benefits and Considerations of Townhouse Living?

One of the most attractive benefits of townhouse living is that there is no co-op or condo board approval process to go through in the purchase or sale. Not only does this mean less hassle and delays in closing, is also means no house rules. Coupled with that, most townhouses have backyards, decks or terraces and beautiful tree-lined streets.

Not forgetting the original and historical details as well that you can find in each one. Most, but not all, date to the 19th and early 20th century. Stained glass, original woodwork, and decorative fireplaces are just some of the original details that buyers go crazy for.

There’s also the low carrying costs. By owning a townhouse, you can save big by avoiding monthly co-op maintenance and condo common charges to use the amenities found in many New York buildings. Along with that, real estate taxes are typically lower on townhouses.

Like everything though, there are a few downsides to consider. The cost of maintaining the townhouse falls completely on your shoulders. Unlike in a co-op, there’s no way to share costs with other owners. Maintaining the home and all its utilities are entirely your responsibility. If you’re planning to sublet by splitting it into multiple units you may require a change in the Certificate of Occupancy. Something which you should consult with a real estate attorney before doing so.

Searching for a Townhouse

Before you can begin the search, there are a few things you need to organize. The first thing to start with is deciding which part of town you want to live in. Begin by seeing as many open houses as you can to familiarize yourself with what’s out there. Secondly, find a good buyer’s agent that specializes in townhouses. Once you have a good understanding of your needs they can provide recommendations and start making phone calls.

Also, educate yourself about townhouses and think about the costs of possible renovations. Learn the details about rent-stabilized and rent-controlled tenancies. Townhouses with multiple tenants are cheaper but come with less privacy so decide which one suits you best. You’ll also need to have your finances in order. The closing costs on a townhouse are typically 20-40% of the purchase price.

 

 

Once you’ve found a place you like you might be tempted to move straight to making a purchase offer. Instead, hold out until you’ve had the property inspected by a licensed home inspector. This is usually not an issue with co-ops or condos but with townhouses, it should be mandatory. Have them check for any structural issues, plumbing or electrical issues. That way, you can avoid any nasty surprises that could be lurking after you’ve bought the property. If you find any issues you might be able to negotiate a reduced price or ask that repairs be done before you sign a purchase contract.

Your buyer’s agent will conduct negotiations on your behalf and work to get the best offer in your favor. If you’re happy with everything your buyer’s agent will help you draft a purchase offer. There may be a bit of back and forth as counter offers are made but once you’ve reached an agreement you can move on to the next step. Once an offer is accepted your broker will introduce you to a real estate attorney who will then iron out the final details and compose a purchase contract. Remember that nothing is binding until both parties have signed on the dotted line.

Reviewing the Contract and Closing

Once an agreement is reached the seller’s attorney will draw up the deal sheet, which will be forwarded to the seller’s attorney who will, in turn, draft the contract for the buyer’s attorney to review. Typically, on signing the contract, you will be required to write a check for 10% of the purchase price. The cash from this will be kept in an escrow account of the seller’s attorney until the whole deal is closed. At this point, you are now “in-contract” with neither side able to walk away without legal consequences.

If you’re having the purchase financed now is the time to begin applying to banks for the mortgage loan. You’ll also need to arrange for homeowner’s insurance. If you’re taking out a loan you won’t be able to close without it. If you’re an all-cash buyer you will still need to clear title. You can usually close within a couple of weeks if you’re paying all cash.

Once the lender is ready the buyer’s attorney will schedule a closing. Be sure to do a final walkthrough of the property to ensure it is still in the same condition you first saw it in. at closing, buyers, sellers, lender and both attorneys will gather in an office to sign the various documents that transfer ownership. The buyer will also write checks for such things as first mortgage payment, escrow payments, and closing costs.

Congratulations, you are now the owner of your very own NYC townhouse.

The post The Insiders Guide to Buying a Townhouse in NYC appeared first on | ELIKA Real Estate.

The Complete Guide to Buying a Townhouse in NYC

Anyone who’s been shopping for a new home in Manhattan or Brooklyn will have noticed that most of the properties for sale are co-ops and condos. While these types of properties may have a lot of benefits they also have a few downsides such as needing board approval for renovations and restrictions on noise levels. However, there is a third and less common sector of residential properties in NYC – townhouses.

 

 

Gardens, historic details, privacy and numerous bedrooms and bathrooms are just some of the benefits of townhouse living. The Space and flexibility they offer truly make them dream homes for many buyers. However, they also come with a whole new set of responsibilities. You’ll be responsible for salting your icy stoop, taking the garbage to the curb and maintaining your boiler and HVAC. But if it’s privacy and independent living that you’re after they’re probably the best choice in the whole city. This complete guide takes you through every step of the process in buying a townhouse in NYC.

What are the Benefits and Considerations of Townhouse Living?

One of the most attractive benefits of townhouse living is that there is no co-op or condo board approval process to go through in the purchase or sale. Not only does this mean less hassle and delays in closing, is also means no house rules. Coupled with that, most townhouses have backyards, decks or terraces and beautiful tree-lined streets.

Not forgetting the original and historical details as well that you can find in each one. Most, but not all, date to the 19th and early 20th century. Stained glass, original woodwork, and decorative fireplaces are just some of the original details that buyers go crazy for.

There’s also the low carrying costs. By owning a townhouse, you can save big by avoiding monthly co-op maintenance and condo common charges to use the amenities found in many New York buildings. Along with that, real estate taxes are typically lower on townhouses.

Like everything though, there are a few downsides to consider. The cost of maintaining the townhouse falls completely on your shoulders. Unlike in a co-op, there’s no way to share costs with other owners. Maintaining the home and all its utilities are entirely your responsibility. If you’re planning to sublet by splitting it into multiple units you may require a change in the Certificate of Occupancy. Something which you should consult with a real estate attorney before doing so.

Searching for a Townhouse

Before you can begin the search, there are a few things you need to organize. The first thing to start with is deciding which part of town you want to live in. Begin by seeing as many open houses as you can to familiarize yourself with what’s out there. Secondly, find a good buyer’s agent that specializes in townhouses. Once you have a good understanding of your needs they can provide recommendations and start making phone calls.

Also, educate yourself about townhouses and think about the costs of possible renovations. Learn the details about rent-stabilized and rent-controlled tenancies. Townhouses with multiple tenants are cheaper but come with less privacy so decide which one suits you best. You’ll also need to have your finances in order. The closing costs on a townhouse are typically 20-40% of the purchase price.

 

 

Once you’ve found a place you like you might be tempted to move straight to making a purchase offer. Instead, hold out until you’ve had the property inspected by a licensed home inspector. This is usually not an issue with co-ops or condos but with townhouses, it should be mandatory. Have them check for any structural issues, plumbing or electrical issues. That way, you can avoid any nasty surprises that could be lurking after you’ve bought the property. If you find any issues you might be able to negotiate a reduced price or ask that repairs be done before you sign a purchase contract.

Your buyer’s agent will conduct negotiations on your behalf and work to get the best offer in your favor. If you’re happy with everything your buyer’s agent will help you draft a purchase offer. There may be a bit of back and forth as counter offers are made but once you’ve reached an agreement you can move on to the next step. Once an offer is accepted your broker will introduce you to a real estate attorney who will then iron out the final details and compose a purchase contract. Remember that nothing is binding until both parties have signed on the dotted line.

Reviewing the Contract and Closing

Once an agreement is reached the seller’s attorney will draw up the deal sheet, which will be forwarded to the seller’s attorney who will, in turn, draft the contract for the buyer’s attorney to review. Typically, on signing the contract, you will be required to write a check for 10% of the purchase price. The cash from this will be kept in an escrow account of the seller’s attorney until the whole deal is closed. At this point, you are now “in-contract” with neither side able to walk away without legal consequences.

If you’re having the purchase financed now is the time to begin applying to banks for the mortgage loan. You’ll also need to arrange for homeowner’s insurance. If you’re taking out a loan you won’t be able to close without it. If you’re an all-cash buyer you will still need to clear title. You can usually close within a couple of weeks if you’re paying all cash.

Once the lender is ready the buyer’s attorney will schedule a closing. Be sure to do a final walkthrough of the property to ensure it is still in the same condition you first saw it in. at closing, buyers, sellers, lender and both attorneys will gather in an office to sign the various documents that transfer ownership. The buyer will also write checks for such things as first mortgage payment, escrow payments, and closing costs.

Congratulations, you are now the owner of your very own NYC townhouse.

The post The Complete Guide to Buying a Townhouse in NYC appeared first on | ELIKA Real Estate.

When to Waive the Mortgage Contingency Clause

There are times when buyers may wish to waive their mortgage contingency clause. With New York City inventory tight, you can help level the field with all-cash offers by doing so. However, we advise using it judiciously since there are pitfalls that you need to be aware of given you are risking your down payment.

We explain the mortgage contingency clause, and when it is advisable to use it to bolster your offer.

 

What is a mortgage contingency?

Once you agree to terms, a mortgage contingency is a standard part of the contract. This means the buyer has a certain amount of time (typically, 30 or 60 days) to obtain a mortgage. Otherwise, he/she can back out of the deal without penalty, and any money paid to date gets refunded.

There are a couple of caveats that usually apply. The buyer must make a “good faith” effort to obtain a loan, filling out the loan application accurately, and following through with a bank’s requested information promptly.

Once the bank approves your loan application, the buyer has to go through with the purchase, unless there are other contingencies in place.

When to waive your right

While a mortgage contingency is in place to protect the buyer, there are times when you should consider waiving this right. You should do this when you want the unit; it is a very desirable property, and, therefore, you find yourself in a competitive bidding situation. We recently discussed “best and final” offer situations where you can strengthen your offer by placing fewer contingencies.

If you are competing with all-cash bids, waiving your mortgage contingency makes your offer much more competitive. Of course, if the seller receives a cash offer with an easy close and no conditions, which is also higher than your bid, you do not stand much of a chance.

What’s at risk?

You need confidence that you will be able to obtain a mortgage within the prescribed time frame. If you fail to do so, you risk forking over your deposit to the seller, which easily could be a five or even a six-figure amount.

Obtaining pre-approval can mitigate your risk greatly. However, a change in the economy (causing lending standards to tighten) or your employment situation could cause the bank to balk at extending you the loan. In this case, a backup plan where you have alternative sources of financing, borrowing from friends/relatives or tapping your retirement plan, is handy.

The lender could also come in with a lower than expected appraisal. In this case, the bank will only extend you a certain amount of credit. It is then up to you to come up with the additional funds.

It’s not all-or-nothing

You do not have to waive the mortgage contingency entirely. You can put in that you have to obtain a mortgage unless the bank refuses to make the loan due to circumstances beyond the buyer’s direct control, such as his/her financial position. However, this does not put you in as strong a position than entirely waiving the mortgage contingency clause.

If you choose to waive the mortgage contingency, we advise keeping it in place based on the building. You may be confident in your ability to obtain a mortgage based on your credit and financials, but the bank also has to extend the loan based on the building. It could deny the loan based on any number of circumstances. These include the building’s poor financials, liens, litigation, or even if the sponsor holds too many units.

While this may not put you in as strong a position, this protects you from events outside of your control.

 

MORTGAGE CONTINGENCY SAMPLE

The post When to Waive the Mortgage Contingency Clause appeared first on | ELIKA Real Estate.

The Ultimate Guide to Buying an NYC Apartment

So, you’re leaping. After living as a renter in the Big Apple for a decade or more, you’re in a position to buy a New York apartment ––– finally. You’ve sacrificed and saved your pennies for the past five years, so now it’s time to become a homeowner in New York City. No matter how much apartment you can afford or in which neighborhood you plan to live, heed these first-time buyer’s tips to ensure your initial home-buying experience goes off without a hitch.

Purchasing a home is rewarding and requires a long-term commitment. You need a professional team who can handle the buying process without losing sight of your individual needs. Here’s how the step-by-step process of buying a New York City apartment can work for you.

 

 

Know what you want and need

Whether you’re looking for a fixer-upper townhouse in Brownstone Brooklyn, or a studio apartment in a walk-up building in West Harlem, focus your search as narrowly as possible and do it with a wish list in hand. Shopping aimlessly in a city of endless choices doesn’t work with designer clothing, let alone real estate –– an H&M budget won’t get you a suit from Prada, much in the same way a one-bedroom budget in Washington Heights won’t get you a sprawling two-bedroom in the West Village.

Know what you want, need, and can afford before you begin the process, and keep your attention fixated on those neighborhoods and apartments that are a good match for your lifestyle.

Making the Decision

Buying a home is a big decision from a financial and emotional perspective. Home ownership is the American dream. Owning a home must be your dream. The choice to purchase a home must make sense for you at this moment. Buying a home is a huge commitment. If you have your finances in order and find a good deal, home ownership is the best investment you will ever make in your lifetime.

Advantages of Homeownership

Freedom. You have the freedom to do with your property as you, please make it truly your home
Build Equity. Rent paid will never be seen again. A mortgage payment allows you to build equity
Appreciation. Between 1998 – 2018 NY home prices saw gains of over 150% on average
Tax Breaks. The US Tax Code allows you to deduct mortgage interest, property taxes plus more
Predictability. Unlike rent, your mortgage payments should remain steady over the years
Stability. Become part of a community, establish roots and lifelong friendships

 

Find a Buyers Agent

If you’re serious about buying a New York City apartment, engage an exclusive buyer’s agent at the start. A qualified buyer’s agent will guide you in the right direction, have access to all listings on and off the market, and be able to negotiate terms and price on your behalf. Don’t know where to begin to find a compatible broker? Ask friends, family, and coworkers for recommendations, and interview your prospective agents before you sign on the dotted line and agree to work with him or her. Find a local, knowledgeable buyers agent that is an advocate for your best interests.

Real Estate Buyers Agents

Listen and analyze your needs and preferences
Keep you updated on current market conditions
Locate apartments and homes matching your criteria
Refer a team of professionals – attorney, inspector, etc. – on your behalf
Perform a Comparable Market Analysis
Negotiate with the seller’s agent on your behalf
Prepare documents and submit Condo or Co-op applications
Handle any additional issues
Assist with post-closing services – Movers, Insurance Companies, etc

 

Get pre-approved for a mortgage

Don’t waste your time, a seller’s time, or the time of the brokers involved in the sale by not getting pre-qualified. Obtain a pre-approval letter before you begin searching for your next residence, ensuring that you’ll have the ability to make an offer should you stumble upon “the one.” Without pre-approval, agents and buyers won’t take you seriously, and they’ll move on to a buyer who has the necessary paperwork. Plus, you’ll know how much cash you qualify to borrow ahead of your search.

Lenders pre-approve home buyers for a specific amount of financing. Home buyers must feel comfortable with the amount of the monthly mortgage payment terms. If the figure strains your budget, monthly payments could become unmanageable over time. Ultimately, it is your decision but make it a wise one. Overstretching your budget can lead to unwanted stress.

How to Finance a Home

Select a Mortgage Broker or Bank
Submit a loan application and receive pre-approval
Determine a suitable payment and choose a loan option
Forward an accepted purchase offer contract to the lender
Receive an appraisal and final commitment letter
Get funding at closing


Co-Ops vs. Condo: Which Works for You?
Co-op

New York City has a relatively unique real estate scene with the inclusion of the cooperative. A co-op provides a more affordable opportunity; Be warned, however, that while co-op boards may not be quite as rigid as they appear in films and television shows, they are still notoriously choosy and have many rules and regulations that can be difficult to navigate.

So what is a co-op? Co-op is short for a Co-operative, which is a corporation that owns a building or apartment complex. The residents of such a building will often describe themselves as owners, but this isn’t entirely accurate. Residents of a co-op do not actually “own,” anything, rather they are shareholders in the corporation. This relationship includes a “proprietary lease” which gives the entitlement to use the apartment. The size of your apartment tends to govern the number of shares you own in the corporation: the more significant the apartment, the more shares. The building is considered an entity unto itself, and a co-op owner owns shares of it, rather than having direct ownership.

To live in a co-op, you must first attend submit a co-op application then attend an interview in hopes of being approved by the Board of Directors, which has veto power to keep out undesirable residents. In addition to your apartment cost, you also pay a portion of a monthly maintenance fee to cover things such as heat, hot water, insurance, staff salaries, real estate taxes and the mortgage indebtedness of the building.

Another part of the co-op structure is that there tends to be a large down payment, which is determined by the co-op board. The co-op board determines how much of your purchase price can be financed and how much must be paid in cash. These payments are unusually high in desirable buildings, which also have very tight rules and regulations about whom is allowed ownership.

Co-ops make up somewhere in the neighborhood of 70% of the New York real estate market, while condos make up the remaining 30%. While co-ops have their shortcomings condos, tend to be more expensive overall.

Condos

Condos are popular as they have more financing options, easier application and acceptance rates, and fewer fees for common areas and maintenance. However, condos are more expensive as there are fewer available, although this is changing as more condo buildings are being built around the city.

A condo is a “real” ownership deal, as the owner gets a deed and an individual tax bill. There are still maintenance fees for common areas, but these tend to be less than those for co-ops. Condos tend to be good options for those that use creative financing, including young buyers and investors.

Over the past decade, both co-ops and condos have been subject to the same fluctuations in the market. However, cooperatives remain lower priced overall and are still the most popular option for first-time buyers.

Have flexibility

Based on the initial wish list you had made before you began shopping, you might not be able to afford Park Slope, even though you have your heart set on that neighborhood. Adjacent areas of Brooklyn, however, could offer more space and additional amenities and still be within your budget, so stay open-minded.

If you aren’t prepared to stray from your dream section of NYC, adjust your list and scratch off that extra bath, or the outdoor space, both of which add thousands of dollars to an asking price.

Locate Your Dream New York City Apartment

How do you find your dream home? Once you are pre-approved for financing, you can begin to search for the perfect home. Looking on your own can be a confusing and overwhelming experience. Your personal buyer’s agent can pinpoint homes that match your needs and preferences.

 

 

How to Search for the Perfect Home 

Choose your preferred neighborhood(s)
Prioritize the facilities and services you would like in your area. (schools, transportation, fitness center,…)
How much space would you want and need in your new home? Which type of space? (dining room, closets,…)
Is your priority the neighborhood or size of home?
Would you prefer to buy a ‘fixer-upper or a ‘move-in-ready’ home?
How much importance do you place on home value appreciation?
Do you value neighborhood stability?
Would a condo or coop be a possible choice?
Which features and amenities (essential and luxury) would you expect in your home or building?

Tip: Preferences may change as buyers go through the process of purchasing a new home.

 

Organize and Submit an Offer

When you find your dream home, it is time to make an offer. Buying a New York City apartment is an emotional purchase, but it is a significant investment. Your real estate agent can help you estimate the fair value of a particular apartment by researching market comparables. Agents will check out similar neighborhood properties, determine market value, and get you a fair price. Hesitate, and you could lose the deal to another buyer.

Property Inspection 

When you find your ideal New York City apartment, it can be hard to see beyond the superb interior design or spacious rooms. Potential home buyers must dig deeper to discover possible hidden issues such as structural damage (water damage, bad construction, etc.) A property inspector can help find those issues for you.

Home buyers should attend the inspection to gain a better understanding of the home. The inspector might unearth minor and major issues. Small issues can be fixed easily – even delayed for a period. Big problems, however, require calling in a specialist to examine the issue. A professional can advise whether you should fix the problem or walk away from the deal.

Homeowner’s Insurance 

New buyers must purchase a homeowner’s insurance policy. This coverage protects homeowners against loss or damage to property as well as liability if someone gets hurt in your home.

Purchase Offer Components 

Price – a pre-approved amount that meets your approval and you are capable of paying
Terms – other factors (financial and timing) in the offer
Contingencies – clauses allowing you to escape the deal under certain circumstances ( a problem that did not exist previously or of which you were not aware at the time of the contract, also perhaps a mortgage contingency should the lender not approve such property, etc.). Contingencies specify any event that must occur for the contract to be formed and enforceable.
Once agreeing on a price and signing a contract of sale you will then need to submit an application to the board of directors of the co-operative or the condominium building. The documents are the same, but the review is different.

 

Closing the Sale

When you have an accepted offer, mortgage commitment, and have completed a home inspection and a walk-through you are getting closer to moving into your dream home. Just a few pre-closing duties will ensure that you do not risk your closing date or mortgage.

Pre-Closing Reminders 

Keep control of your finances and credit
Stay in contact with your real estate agent and lender.
Return phone calls and complete documents promptly.
Contact your agent or attorney at least once or twice a week.
Verify with your lender that the mortgage funding steps have reached completion
Do a final walk-through of the home with your real estate agent.
Before closing, confirm with your attorney, home insurance official, and lender that the settlement statement, certified funds, and evidence of insurance are in place.

 

Moving In

Your dream home awaits its new owners. Hire a reputable New York City moving company to help you move into your new apartment. Congratulations!

The post The Ultimate Guide to Buying an NYC Apartment appeared first on | ELIKA Real Estate.

Moving to NYC? – 5 Things You Should Know When Apartment Rental Hunting

Finding a rental apartment in The City That Never Sleeps doesn’t have to be a headache, as long as you are prepared for the hunt. With all the borough and price options out there, doing a little research ahead of time can save you a lot of legwork in the long run. When it comes to searching for the perfect Big Apple apartment, here are five things you should consider.

1. Get Your Bearings Straight 

The first step in finding the perfect rental is deciding which part of New York City you want to live in. Before your start borough hopping, you need to get your bearings straight, so you know how each location relates to the next regarding distance and access to the things you want in and around your neighborhood.

 

Image via Flickr by Mitch Altman

 

Whether you choose the hustle and bustle of Manhattan, the progressive culture of Brooklyn, the diversity of The Bronx and Queens, or the suburban feel of Staten Island, exploring the boroughs by foot is a great way to get to know them. Make sure you’re equipped with a map app.

2. Figure Out Your Budget Ahead of Time and Stick to It 

If you’re already on the apartment hunt, but you haven’t figured out your budget yet, then you are wasting your time. With rental prices in New York City running the gamut from insanely expensive to surprisingly affordable, having a well-thought-out budget in mind is half the battle.

With that said, it’s important to stick to your budget once you do come up with one. Again, there is a range of rental prices in New York City, so don’t feel pressured to rent an apartment that’s not in line with your budget. Although there is significant competition when searching for a rental, more and more rentals pop up every day.

3. Let a Rental Agent Help 

Going apartment hunting in New York City without the help of a rental agent is like going on a cross-country journey without a compass. Whether you are a rental veteran or a first-time renter, rental agents have access to thousands of resources in the city. Rental agents can help you through every step of the process, and they charge reasonable fees for their services. Average brokerage fees range from 15 percent of the first year’s rent to the cost of 1 month’s rent, and there are usually no-fee rentals as well, depending on the area. Keep in mind that no-fee rentals will probably come at a higher cost than rentals with fees.

4. Have One or Two or Three Backups 

As mentioned before, the rental market in the five boroughs is a competitive one, so it’s important to be proactive with your search. Don’t put all your rental eggs in one basket because you might lose to another renter. Instead, submit as many applications as possible, so you always have an apartment or two to fall back on.

5. Read the Lease Thoroughly 

Once the hunt is over and you’re ready to sign a lease, make sure you thoroughly read the lease agreement, so there is no confusion on the move-in or move-out day. From the lease terms and dates to the renter’s responsibilities, knowing your lease is all part of the renting experience.

By keeping in mind the rental pointers above, your move-in day will be a hassle-free one

The post Moving to NYC? – 5 Things You Should Know When Apartment Rental Hunting appeared first on | ELIKA Real Estate.

“Best and Final” Offer to Purchase Real Estate

In the home buying process, you may find the seller’s agent asks you for your best and final offer. Typically, they do this when the seller has multiple offers on the table. You may confront this situation, since the New York City residential remains robust with limited supply and local/global demand, particularly at price points below $5 million.

We explore a way to approach the situation in order to provide you guidance should you the situation arise.

Rely on your buyer’s agent

We have previously expounded on the merits of an exclusive buyer’s agent, but this is one situation where it becomes readily apparent. An exclusive buyer’s agent is in the best position to use his/her real estate expertise to your advantage. At Elika Associates, we have more than two decades worth of experience guiding buyers that we use to gauge the situation for your benefit.

Assess the situation

Your agent is in a prime position to understand the situation. Not all bidding wars are the same, and your agent has likely become very good at reading the tea leaves. He/she knows the right questions to ask and can interpret the answers.

It is worth remembering that an exclusive buyer’s agent has a fiduciary duty to represent you and pass along any information that is in your best interests.

A seasoned agent also knows that a “best and final” offer does not always mean it’s final.

Doing the homework

Your agent knows the overall market. But, more importantly, he/she knows the neighborhood and maybe even the building. The agent you hire can tell you how quickly or slowly similar units are selling.

Then, your agent synthesizes this information in order to compile a fair value estimate. This is an art and a science, and an agent has to know which data is the most meaningful and receives more weight. This is extraordinarily useful. Clearly, you do not want to pay more than the current market value if avoidable. At this point, you are in a better position to submit your best and final offer with more confidence that you are putting yourself in the best position to have your offer accepted while not overpaying.

What the seller is thinking

It is helpful to understand the seller’s mindset in these situations, and why he/she is asking for a “best and final” offer. Sometimes, multiple offers occur when the property is underpriced. In this case, you do not have to feel bad about bidding above the asking price. Typically, these settle about 5%-10% above the initial asking price.

The seller may not necessarily accept the highest price. He/she wants to close with a minimal amount of hurdles. If a buyer has just a few or even no contingencies, this works to his/her advantage. An all-cash offer puts a buyer in an advantageous position. A buyer with mortgage financing could level the playing field by offering a significantly higher price than the cash purchaser, perhaps $15,000 to $20,000, based on our experience.

In a co-op, board approval is a key consideration. It is more than the dollar amount of the offer. Your presentation counts, and a well-qualified and prepared buyer stands to come out on top over a buyer that may not pass the board’s muster, even if he/she is putting down a larger down payment. Therefore, submitting a well-packaged offer with sound financials that can potentially pass the interview will receive a seller’s serious consideration.

Dropping out

You should not feel pressured to participate in the process. The buyer does not have to submit a best and final offer, and you can stand by your existing bid. Additionally, you can drop out of the process at any point since your offer does not become binding at this point.

However, inventory remains tight, and, if you find a property you really like and want it, an extra $20,000 amounts to only an additional $76 per month, based on the current 4% mortgage rate.

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What is a Co-op? – Everything You Need to Know About NYC Co-ops

It’s no secret that buying a home in NYC can be a long and daunting process – and for those looking to buy a co-op, the process can be even more intense. New York is a city comprised almost entirely of cooperatives and condominiums along with a smaller selection of private apartments.

Typically, if a building is older (built pre-1980’s), it’s usually a co-op. These buildings make up approximately 80% of the non-rental apartment stock. Unlike a condo, co-ops are owned by a corporation. Meaning that when you buy an apartment in a co-op building, you are not buying real property (as you would in a condo). Instead, you’ll be buying shares in the corporation. These shares entitle you to a proprietary lease. Which makes your relationship to the building closer to that of an investor. The larger the apartment, the larger the number of shares allocated.

However, purchasing a co-op apartment is not a simple process. Cooperative boards don’t take on anyone. Buyers have to pass a lengthy board application review along with a co-op board interview. Until then, you’re not even near to closing. It’s an ordeal that drives many people away.

But with the right knowledge and an experienced real estate broker, you’ll be far more confident of success. This complete guide will take you through the entire process. By its end, you’ll know everything there is to know about the co-op buying process in NYC.

 

 

What makes buying a co-op attractive?

As mentioned, New York’s housing market is mostly comprised of condos and co-ops. Which one you choose depends entirely on your personal and financial circumstances, your lifestyle preferences and experience.

For many buyers, it’s the price difference that pulls them in. Co-op apartments typically sell for 10-40% cheaper than condos of similar size and quality. Part of the reason for this is that co-op buildings tend to be older with fewer of the bells and whistles seen in the thousands of condos that have been going up in the past decade. Many new condos also tend to have far higher closing costs if you’re taking out a mortgage. Another reason co-ops are cheaper is that buyers have to be approved by a board. Along with the hassle and chance of rejection, you’ll also be opening your financial records to folks you’ll be sharing the elevator with for years to come. Because of this, prices are often lower to entice buyers.

Another important difference with co-ops to be aware of is the strict rules and regulations. The co-ops shareholders elect a volunteer co-op board that oversees the care and maintenance of the building. The board creates and enforces rules about everything. Whether pets of any kind are allowed inside, what sort of renovations are permitted and restrictions on noise levels at certain times. Unlike condo boards, they have the power to evict an extremely disruptive shareholder and force them to sell.

In summary, what makes a co-op an attractive choice is the lower price tag and more space. Buyers who don’t want to deal with hour-long commutes from out of the city will find co-ops the best choice.

The Pre-Search

Before you can start looking for your dream apartment, there are a few things you need to sort out. The first thing is your savings and finances. Down payments on co-ops can be as high as 30%. You should also know your credit score. Unless you’ve got a substantial amount of savings, you’re going to need a mortgage loan to purchase your first co-op in NYC. Your credit score will determine whether banks will lend to you or not. As such, you’ll need to raise it as high as possible and keep it there.

You should also research everything related to buying an apartment in NYC. This means completing a REBNY financial statement so that you have a clear understanding of your financial picture. You’ll also need to look at your debt-income ratio, how many liquid assets you’ll need to cover the down payment, closing costs and satisfy the co-ops post-closing financial requirements. You’ll also need a good understanding of the NYC real estate taxes you’ll be facing when buying, owning and selling an apartment in NYC. Lastly, you should research what the most common co-op buyer mistakes in NYC are. Learning from the experience of others will make you far savvier when the real search begins.

The Search

Once you’ve done your research and enlisted the services of an experienced buyer’s agent, then it’s time to start looking for your perfect apartment. This part doesn’t differ much from the condo search process. You’ll still need to attend open houses, and if you’re new to the city, you should do it often. This is more considerate of your brokers time as its hard for them to help you if you don’t know where you want to live, what exactly you’re looking for or what your price range is. When you’re signing in for an open house make sure you write your buyer agent’s contact info. That way, the listing agent can follow up with them instead of harassing you with newsletters and offers.

When you have a better sense of what you’re looking for, let your buyer’s agent know, and they can begin sending you some property suggestions. Try to be reasonable with your demands as the inventory in New York is not exactly overflowing. Stick with simple criteria such as price and number of bedrooms. Would you prefer a doorman building or one with no doorman and less monthly expenses? Do you have a dog or cat and therefore need a building that allows pets?

Most purchase contracts in NYC stipulate that the condition of the apartment must not have changed substantially since the signing of the contract. The only way to prove that is to take a lot of photographs. Since properties in NY are sold as is, there is no way to prove otherwise if anything has changed when you close the contract. So when you’ve found a place, or several, that you’re interested in, arrange a private viewing and take those photos.

Making and Negotiating an Offer on a Co-op

Now that you’ve found the perfect apartment, it’s time to make an offer. If you’ve signed up with an experienced buyer’s broker, they will guide you through the whole process. They’ll explain everything about the closing process and what happens between offer, acceptance, and closing.

You’ll be happy to know that once your broker has received an accepted offer, they will introduce you to an experienced real estate attorney. They’ll take it from there and handle the review and negotiations on your behalf. They will also conduct legal and financial due diligence which involves reviewing the original offer, co-op financial statements, board minutes and the co-op lien search.

Any offer on an NYC apartment should include, at a minimum, the following:

Offer amount in USD
Address of the property you are making an offer on
Amount of financing or the down payment amount
Any contingencies
Bank approval letter if you are financing
Proof of funds if you are purchasing all cash
Completed REBNY Financial Statement
A short biography or home buyer offer letter
Attorney contact information

 

The above will be sufficient for the vast majority of co-op listing agents. However, a small minority may require a signed Submit Offer form also. Your broker will negotiate the offer with the listing agent on your behalf. If the offer has been accepted or if a counter-offer has been made you’ll be informed immediately. If there are multiple competing offers, you may end up in a best and final offer situation. In this case, all bidders will make their best offer by a final deadline, with the best offer being accepted.

Keep in mind that real estate offers in NYC are not binding. Even if it is in writing nothing becomes legally binding until both parties have signed the purchase contract. You could sign your purchase contact when submitting, to show that you are serious about closing. But it won’t become binding until they sign as well and return it to your attorney.

Once you have an accepted offer, the seller’s broker will circulate a deal sheet to your attorney, the seller’s attorney, and both brokers. The purpose of this is to put the two attorneys in touch so they can state the basic terms. After your attorney has negotiated the purchase contract, you meet to review everything before signing on the dotted line. Once done you’ll also hand over a check for a 10% contract deposit. Your attorney will then deliver all this to the seller’s attorney for counter-signing.

What follows is a tense day or two for a response. If the seller is good to go, you should have a fully executed contract within that time. However, there are cases where the seller shops a buyer’s signed contract and goes with a better offer. If that happens, there’s nothing more the buyer can do.

 

by Wally Gobetz on Flickr

 

Completing the Co-op Purchase

If you’ve made it this far, you are now “in contract.” Neither side can now back out without legal penalties. The one exception to this is if the co-op board rejects the application. If that happens, then you can exit without penalty.

Once you have a fully executed contract, you should immediately start putting together your co-op broad application. As soon as you have an accepted contract you can begin soliciting friends and co-workers for personal and professional reference letters. Typically, these take the longest time to collect so the sooner you start, the better.

Ensure that everything on the board application is filled in. If something doesn’t apply to you, simply write “N/A” instead of leaving it blank. Your buyer’s agent will help you with this and guide through the whole process. It is vital that you follow all instructions on the co-op board application to the letter and that you submit all requested documents. If you are taking out a mortgage for the purchase, you’ll need a loan commitment letter and an Aztec Recognition Letter, both of which your broker or bank can help you with.

You should take your board application very seriously as any mistakes, or un-submitted paperwork could cause delays or even lead to the whole purchase falling through. You should also have it neatly organized with a table of contents and page dividers. By the end, you’ll have a lot of paperwork so it should be well ordered and presented when you deliver it to the listing agent for review. If you’re uncertain of anything or want to know how strict or lenient the co-op board is you should ask your buyer’s agent for advice.

Passing the Co-op Board Interview

Now we come to what is, for a lot of buyers, the most nerve-wracking part of the co-op buying process. The co-op board interview in NYC has a pretty bad reputation for being intrusive and unpleasant. That said, it’s rarely as bad as many people make it out to be.

Remember to keep it short, sweet and polite. Answer any questions they ask and stay on topic. Often, they’ve already approved your application from seeing that you are financially qualified. They want to meet you in person to see what you’re like and make sure you would make a good neighbor. Still, you should be well prepared for it and read up on how best to pass the interview. Your broker can tell you what to expect from this particular board and what their biggest concerns with potential neighbors are.

Closing your Co-op Apartment Purchase

If everything has gone well, you’ll receive notice from the managing agent that you’ve passed the board interview within one or two business days. If you’re lucky, you may even get an informal indication that you’ve passed after the board interview.

Once the co-op board approves, you’ll simply need an all clear to close the bank. From there your attorney will work with the seller’s attorney and your bank to coordinate a closing date and process for the sale that works for all parties. Keep in mind that a commitment letter will be needed from your lender for the purchase application submission. To ensure that your lender is good to go once you receive board approval.

Your buyer’s agent will schedule a final walk-through of the apartment, usually the day before closing or even on the same day. Use this opportunity to take one final look at the property before the close and make sure it hasn’t substantially changed since you last saw it (remember to take those photos!). Check that all the appliances, toilets, showers, sinks, lights and electrical outlets are in working order. You should also check for any damage that may have been caused by the movers when they moved out the seller’s furniture.

Most closing days take place at either the managing agent’s office or the seller’s attorney’s office. Usually present will be the seller and buyer, attorneys representing the banks, along with a closing coordinator to guide everyone through the closing process. The buyer and seller will also usually be present unless they have given power to their attorneys to act in their stead. Typically, the brokers are not present at the closing and will usually pick up the commission checks at a more convenient time.

There you go! You are now the proud owner of your own NYC co-op apartment. The whole process, when looked at in isolation, make seem long and complex, but when laid out like this you can see how straightforward it is. Hiring a good seller’s agent will make the process run much smoother because, as you can see, there are many steps to a co-op purchase. Educate yourself about every step of it and stay well organized. When done right, co-op purchases can be a walk in the park.

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Co-op Flip Tax – Understanding Flip Taxes in NYC

You’ve probably heard the term “flip tax” mentioned in conversations that involve buying and selling New York City real estate. Flip taxes cannot be deducted as a property tax, typically paid by the seller and sometimes the buyer of an NYC co-op.

Anyone who’s ever bought or sold a co-op will be familiar with something called a flip tax. It’s basically a co-ops way of saying “So you’re leaving, huh? Well, pay us some money and we’ll let you go.” Flip taxes, sometimes known as transfer fees, are a way for a co-op to increase its financial resources without resorting to unpopular maintenance increases. If you’re new to the co-op market the term might cause some confusion. Read on for the definitions and tips to arm yourself with the right knowledge for buying your dream NYC apartment.

Below are some of the most asked questions about flip taxes.

 

Flip Taxes 101

A Flip Tax is a fee that is paid in addition to the purchase price of a co-op apartment following a sale. It can be paid by either buyers or seller – more on that in a moment – and can be either a flat rate or percentage of the sale price or profit made. The price varies by building and can be hard to pin down. Because of NYC’s typical 6% real estate commission, closing costs for sellers are sky high. Often more than 8% of the sales price. While you won’t be able to eliminate the Flip Tax you have a chance of being able to negotiate the 6% commission when selling.

How long have flip taxes been around?

Flip taxes first came about in the 70’s and 80’s. At the time, there was a wave of co-op conversions throughout the city. Many of these buildings were in poor condition and badly in need of capital investment. The flip tax work as a way for co-ops to bulk up cash reserves for the future. It also prevents people from buying apartments at a cheap rate, then turning around and selling them for much more without putting anything into the value of the apartment.

Who pays the Flip taxes?

More often, flip taxes are paid by the seller. The idea was that a flip tax to the seller would help keep the purchase price for the buyer down while keeping a small percentage of the seller’s profits for the co-op or condo. However, in 2010 the sluggish housing market changed that. It’s now more common for sellers to pass on the tax to buyers instead. The reason for the shift was that sellers began including the flip tax into the offer price. The higher price meant fewer offers. By lowering the asking price and having the sellers pay the flip tax the sellers could get a little more interest in the property.

If you’re currently looking to buy a co-op you should ask early whether the property requires a flip tax to be paid by the buyer. In any case, the co-op doesn’t care who pays it, they just want to see it go into their reserves.

What’s the point of imposing a flip tax?

As mentioned above, the profit goes directly to a co-op’s operating expenses. The point is to avoid assessments and maintenance increases for the shareholders. With thousands of dollars in reserve funds, if the building requires a capital improvement project, often the flip taxes from past sales can pay for the project in full or at least a good part of it. In turn, the maintenance fees won’t need to be increased, and assessments wouldn’t be necessary either.

How Much is a Typical NYC Flip Tax?

Flip taxes come in many shapes and forms. Typically, the price in NYC is 1-3% of the gross sale price. However, each building has its own policy and there is no way to generalize. Usually, it comes in the following ways:

Percentage of the gross sale price
Set dollar amount per co-op share
Percentage of sales profit
Hybrid of any of the above

Co-ops, Condos or Both?

When dealing with a co-op, it’s practically a guarantee that there will be a flip tax. With condos, it’s a little bit different. Instead, condos can be subject to transfer taxes, which is something entirely different. In order for a flip tax to pass, most bylaws/proprietary leases require a 2/3 majority vote from the shareholders. Any absent vote is a no vote. Many condos are owned by investors from out of town this makes getting a 2/3 majority difficult. 

Is there any way I can get out of paying the flip tax when I sell my apartment?

Unfortunately, no. You’ll have no choice but to ante up for this flip tax when you go to sell your co-op. There is the possibility that you could purchase an apartment in a building with no flip tax.

Are flip taxes legal?

A flip tax must be written into a co-op’s proprietary lease to be legal. If not verbalized in a lease, two-thirds of the shareholders must approve the imposition of the flip tax.

Are Flip Taxes in NYC Tax Deductible?

Usually, you can subtract the flip tax when calculating your taxable capital gains. However, you should still consult your attorney and tax professional for advice.

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