What is a buyer broker?
As your buyer broker we have access to a database that allows us to reach and offer you every property for sale in the City. In a vast marketplace like New York City, utilizing a buyer broker means saving a lot of time in the selection; having access to an expert perspective and useful contacts, such as an attorney, mortgage banker, contractor, etc. as well as gaining an informational advantage that leads to a simple, confident and informed decision.
The buyer does NOT pay any brokerage fees to her broker, or to the seller broker. The price is all inclusive of these fees that are paid by the seller.
The buyer gains only an advantage in using her broker who becomes a valuable advisor during the selection of what the market has to offer.
Among other services, the buyer broker presents the offer to the seller, negotiates the price and the sale conditions favorable to you and prepares the documentation to be sent to your lawyer.
Prerequisites to invest in the USA
There is NO need to be a resident or hold any kind of visa to buy property in the USA.The NYC real estate market is very transparent and diligently regulated. Buyers and sellers are therefore protected against misinformation.
Cooperation amongst real estate brokerage companies is seamlessly integrated in the market. The guidelines implemented by the Real Estate Board of New York, the regulatory organism, are known and accepted by all the brokers. Every brokerage is requested (if acting as seller broker) to share its listing with the entire market and vice versa (if acting as buyer broker), it has access to each single listing on the market.
The clear benefit to you as a client is that you only need one trusted real estate agent to analyze and reach the entire market segment within your specifications whether we are talking about selling or purchasing a property.
An apartment that is listed by a company is purchasable through any other company (the two companies will co-broke); same price and conditions, there are no “special offers”.
With that said your broker will assist you in negotiating the best deal within reason according to the dynamics just described and current market conditions.
Needless to say, time is the most important factor in snatching up a great deal once you have done your due diligence and you are comfortable with all the elements involved in the transaction. You need to go for it before somebody else does or you will waste the efforts invested in your search.
In New York City, there are two main categories of apartments when it comes to legal entity that you are actually buying: condominium (condo) and co-operative (co-op). The differences amongst the two are substantial. Condominium is by far the best choice if you are strictly investing and you want to rent out the unit.
If you buy a co-op, you are not technically buying real estate. What you are buying are shares of a company which is the owner of the building. By buying those shares you are entitled to live in the apartment but oddly enough you remain a “tenant” in your own apartment. In New York City the majority of the buildings are still co-ops. They are run by their elected boards of directors which make all the important decisions like, for example, approving a new buyer. It can get tough at times if the buyer is a foreigner. The approval process includes the nearly total disclosure of the buyer’s financial situation as well as a personal interview with the board.The whole thing can take up several months. The majority of the co-ops tend to accept the prospect that works and pays taxes in the USA with good financial references and excellent credit. The co-op board is not required by law to offer an explanation to the applicant when it denies the applicant’s candidacy and practically never offers one to avoid dispute.
There are often restrictions to the amount of mortgage allowed to the buyer to purchase the unit.
There are also restrictions (which vary) to the number of years the owner can rent out his unit. Often it is 3 years out of 5. When it is possible to rent the unit, the prospect tenant has to personally go through an interview with the board.
There is often an addition “flip” sale tax that the building can decide to apply to buyer or seller or both. The proceeds go into the building coffers in the company’s reserve fund.
There are also minimum liquid and asset values a prospect buyer has to meet in order to be approved.
Given this scenario it is advisable to refrain from buying a co-op if the intention is the one of renting the unit and receiving a rental income. This kind of property should be your primary residence or pied-a-terre.
The condominium is surging in popularity every year. The vast majority of the new constructions are designated to condos.
In this case we are talking about a straight real estate transaction where the buyer becomes the owner of the apartment and the corresponding communal share of the rest of the building. There are no restrictions, nor personal interviews for what concerns the kind of buyer permitted; foreign investors are welcome; and the buyer can immediately start renting out the property soon after the closing.
The condo also has a board of directors but a condo board does not have nearly the amount of power as a co-op board. The process of approval is a formality.
It is definitely easier to buy and sell a condo. Therefore this is the type of property the investor prefers.
Over the last decade we have witnessed all sorts of beautiful new projects from the ground up as well as renovations of historical buildings. A new or renovated project often obtains from the City tax benefits that can span 10 to 25 years therefore reducing the monthly carrying costs of the apartment and increasing the net profit of the investor that rents it out.
Townhouse (also known as Brownstone)
This is a third kind of property. In this case, we are talking about a whole building comprised usually of 3 or 4 floors. It can be a single family home or a two/three family or more if the building is divided into apartments. A backyard garden space is usually part of the lot. In this case the buyer who becomes the owner is the only person (entity) who controls and manages the building whether she does it directly or through our services.
The monthly costs related to the upkeep of the apartment are divided into two kinds: real estate taxes and maintenance. Depending on the size, location, tax abatement and kind of building, real estate taxes may vary from few dollars to thousand +. In the same way maintenance expenses may vary from $300 dollars to thousand +.
The closing costs paid by the buyer include the attorney fee, the recording fee (around $400+), application fee ($300+), the title insurance fee (approximately $450 per $100,000), managing agent fee (around $250), title closer ($250).
Only if you are purchasing a new apartment you will be requested to pay the transfer taxes (in a resale it is the seller that pays). NYC transfer Tax: 1% of price up to $499,999; or 1.425% of price if $500,000 or over. NY State Transfer Tax: 0.4% of purchase price.
There is a mansion tax of 1% for purchases over $1 million.
As a broad idea closing costs may vary between 2% and 4% of the purchase price.
Each transaction is different. As your buyer broker, together with your attorney, we will prepare a detailed outline of the costs before the closing.The above obviously does not include the cost of financing of which your mortgage professional can provide details.
The Purchase Process
While you analyze the NYC residential market, it is advisable to select and get in touch with a trusted attorney. You can choose one on your own or work with our partners. In any case it is important for the attorney to be based in NYC; he must be an expert on the local market in order to provide the best advice.
It is also important to select a certified public accountant that will help you draft your rental income statement if you decide to rent out your property.
If you are a foreigner you must know that opening a bank account is easy and should be the first thing to do in order to transfer the funds needed for the purchase to the U.S.
Depending on the country, transferring funds can take up to a week or more so keep that in mind.
Every transaction begins with the selection. After seeing several properties and finding the best one, the negotiation will start with your offer to the seller. This offer is not binding, even though it is made in good faith. Your broker will submit it in writing or over the phone to the seller’s broker, and advise you on how to move forward; no signature is needed at this stage. Once an agreement on the price is secured and the offer is accepted, your lawyer will then receive the contract to be reviewed along with all the building documentation that is part of the transaction.
While your lawyer is reviewing the contract, the seller can certainly continue to show the apartment and find another interested buyer. It is essential to review everything with attention, listen to your lawyer’s advice but you need to move quickly if you don’t want to lose the deal to someone who is faster than you.
The contract must be signed along with a minimum 10% deposit that will be held in the seller’s attorney escrow until closing. Once the contract of sale is signed by buyer AND seller the parties are mutually bound. At closing, you will have to pay the balance (90%).
After signing the contract, the next step is submitting the Application Package to the Board. For a condo, this involves getting the waiver of the right of first refusal. Even if the process is just a formality in a condo because the board cannot veto a sale (the board would have to actually purchase the unit to do that…almost unheard of), it still implies disclosure of financial and personal information. For a co-op, the next step is the more formal interview where you will have to disclose nearly all of your financial and personal information.
To be noted: if the building is new or a renovation and you are buying from the developer, there is no need to obtain the waiver and this step is not necessary.
Some Legal Aspects in Brief
*There are a few different ways you can purchase a property in New York City:
*Through a Limited Liability Company or Corporation controlled by a non-U.S. company;
*Through U.S. LLC of which the investor holds the interest directly in his name;
*Through U.S. Corporation of which the investor holds the interest directly in his name;
*Directly in your name.
There are then variations along these general models. Each solution has advantages and disadvantages. It will be best to consult directly with your lawyer as your are starting the search.
Especially for foreign buyers, the following are key elements to evaluate during this process of legal choices:
*Nationality and Country of residence of the investor;
*Investment is “residential” or “commercial” with potential for construction/development;
*Long term (5 years or more) or short term;
*Age of the investor;
*The investment will provide a rental income or it will just be a second home;
*Need for limited liability (important if renting the unit out especially);
*Total value of the investment;
*Interest in anonymity;
*Willingness to file taxes in the USA;
*Number of investors involved in the transaction (are they related?).
The last phase of the transaction is the Transfer of Deed from the seller to the new owner. Once the Waiver is obtained and the title insurance company has cleared the title held by the seller claiming ownership of the property, everything is good to go. Buyer, seller, their attorneys, the title officer and brokers will show up at closing where the buyer will transfer the remaining 90% of the balance due and in exchange will receive the deed after seller and buyer sign all the necessary paperwork.
If you cannot be present at closing you can simply confer power of attorney to your lawyer who will execute everything in your name.