From understanding building types to passing a board review, buying an apartment in New York City can be a harrying process even for locals who have months to make a decision. For buyers who aren’t based in the United States and who may only have a few days to view properties and make an offer, the purchase of NYC real estate can seem like an overwhelming process. But, with solid guidance and an understanding of the market, investing in New York City real estate can be a rewarding experience for foreign buyers. We’ve pulled together this comprehensive guide for foreign real estate buyers who are interested in investing in NYC.
Condos, co-ops, cond-ops and more, our guide to New York City building types covers all the bases. We also have a list of classic apartment layouts and some tips for the pied-a-terre buyer. While it is possible for international buyers to purchase co-op property, most prefer to purchase a condo in order to avoid any difficulty that may arise with obtaining approval from the co-op board. Buyers who wish to use the property as a rental need to make sure it is allowed by the building’s rules prior to purchase.
While purchasing a property with cash can simplify the process and eliminate some fees, it is also possible (although not easy) for foreign buyers to obtain a mortgage for as much as 75% of the purchase price of their property. Look for a lender that specializes in programs for international buyers and plan to provide documentation such as proof of employment, a proven history of mortgage or rent payments (at least one year), proof of funds available for closing and credit references.
Monthly maintenance / common charges – these monthly fees vary from building to building and can range from hundreds to thousands of dollars. As a general rule, the more amenities a building offers, the higher the monthly fee will be. These charges go toward maintenance of common areas such as the lobby, gym, or pool and to pay building employees.
Property tax – this is a tax assessed by local and state governments. Check for tax abatements and available deductions to try to minimize the amount of tax you will need to pay. In co-ops, the property tax is built into the maintenance fees.
Assessment – in some instances a building will charge a special assessment. This is an additional fee on top of the monthly common charges or maintenance and can be the result of a shortage of building funds, necessary repairs, or to pay off a law suit. Buyers can ask sellers to pay off any special assessments as a condition of purchase.
Working with brokers
As a buyer in New York City, you are not responsible for paying any fees to a real estate broker. Sellers have pre-arranged with their listing agent to pay all fees for both their agent and the agent representing the buyer of their property. When you work with RealDirect as your buyer’s agent, you receive up to 1% cash back at closing.
Contract & Attorney review
Once a property is selected and a purchase price agreed upon, a contract will be negotiated and agreed upon by the attorneys for both parties. This process usually takes 1-2 weeks. Until the contract is signed by both parties, the sellers can continue to show the property and entertain other offers. So even if the sellers have accepted your offer, neither party is bound to the transaction until the contract has been signed.
When an offer is accepted and a purchase contract completed, buyers will be required to transfer a deposit equal to 10% of the property purchase price to an escrow account managed by the seller’s attorney. This insures that the buyer will act in good faith during the transaction.
When you purchase property in New York City, there are an assortment of costs that go along with the transaction. Some of these costs are paid by the seller and others are paid by the buyer, including:
New York City transfer tax – this tax ranges from 1-1.425% of the property purchase price.
New York State transfer tax – in addition to the city transfer tax, the state also charges a tax equal to 0.4% of the purchase price.
Mansion tax – on properties of $1 million or more, New York State charges a mansion tax equal to 1% of the purchase price.
Attorney’s fees – attorney’s fees can be ~ $2,500.
Title search – This process verifies that the seller has a right to convey the property and once the purchase is completed nobody other than the buyer will be able to claim ownership. Cost of title search is $450 per $100,000 of the purchase price.
It is also common to encounter a host of other smaller expenses such as document fees, mortgage application fees, building application fees, recording fees, appraisal, credit report and bank fees. Many of these mortgage related fees are avoidable by purchasing with cash instead of financing.