The New York City real estate market is among the most exciting and competitive in the world. So when you’re ready to make a purchase in this highly desirable market, there are a few things you should know so you beat out the competition.
1. Prepare Your Finances
Before you step foot into your first open house there are a few preliminary steps you should take. Check your credit score to make sure it’s in a good range. Look at your finances—do you have enough saved to put 20% as a down payment? Contact a bank or lender and get a pre-qualification letter. If you’re moving quickly, take the next step in securing a loan, and get a loan pre-approval, or a written “good-faith” estimate of what you’ll be approved to borrow.
2. Identify the Type of Property You’re Looking For
Condos, co-ops and townhouses are all options in New York City real estate and each come with unique attributes. Co-ops make up about 75% of apartments on the market at any given time. With a co-op you are buying a share of a building, you don’t own your exact unit, but you are entitled to a long-term proprietary lease. Condos make up about 25% of apartments on the market. When you purchase a condo, you get a deed as if you were buying a house. Lastly, if you purchase a townhouse—which can be single-family or multi-unit—you will own both the building and the land.
3. Understand Timing
If you’re purchasing a condo or townhouse, you could close within 60 days of the contract being signed as long as your loan is secured in a timely manner. The co-op process is more involved, including board approval, and could be 60–90 days, or longer.
4. Closing Costs
In addition to your down payment, there are fees associated with purchasing a property and they vary depending on what type of home you’re buying. At closing you will most likely need multiple checks for these various fees, so get an understanding of what these are and how much they could potentially be. Check out Douglas Elliman’s full New York City Buyer’s Guide for a comprehensive breakdown of closing costs.
5. Mansion Tax
In New York State, there’s an additional tax imposed on residential purchases that are sold for over $1 million called mansion tax. The tax rate ranges from 1%–3.9% depending on which bracket your home price falls into. Mansion tax is also usually due at closing.
—by Jacqueline Kuron