Step 1 in Purchasing Houses, Apartments, or Lofts
Before any search is started, you should get pre-approved for a mortgage loan and research real estate attorney’s. (Preferably one that has experience in your area and what type of property you’re looking to purchase.) Also, you should start listing and writing down what you’re looking for in a residence.
Step 2 in Purchasing Houses, Apartments or Lofts
Once you’re truly interested in a property for purchase, an offer should be placed in writing on a Real Estate Board of New York (REBNY) Offer Form and a Real Estate Board of New York (REBNY) Financial Statement sheet. These two things will put your offer in prospective and will convey your offer in the most simplified way to the seller.
REBNY Offer Form lists: the buyers and attorneys contact information, the buyers work history, salary and net worth, offer amount, closing date, financing details and who the buyer has pre-qualified a mortgage with.
REBNY Financial Statement sheet lists: the buyer’s total net worth by itemizing in detail all assets and liabilities and the buyer’s total income.
Accepted offer to Contract Signing (1 - 3 weeks)
Once the seller accepts the buyer’s offer, the seller’s attorney proceeds in preparing a contract of sale. At that point, the buyer’s attorney will begin to examine the buildings financials, the offering plan, the meeting minutes and “contract of sale”. A “Due diligence” investigation is conducted.
Note: For houses and townhouses, the buyer should schedule a thorough inspection of the physical condition of the property- from roof to foundation. (Use a professional like Accurate Building Inspectors.)
Once the buyer’s attorney concludes his or her “Due diligence”, the buyer signs the “contract of sale”. The buyer is then obligated upon signature, to pay a 10% contract deposit of the purchase price – this deposit can be as low as 5% in some instances. The contract and deposit is then forwarded to the seller to be counter signed. The deposit is to be held in the seller’s attorneys escrow account until the official closing of the sale.
Note: Until both respective parties sign the “contract of sale”, there’s no official deal and the seller can still accept other prospective buyer’s offers. Speed is of the essence.
Mortgage Financing (4 - 6 weeks)
Before financing is involved, the buyer needs to make an important decision by either choosing to locate a financial institution on his or her own or to research and hire a mortgage broker. Mortgage brokers are independent of financial institutions and typically will take the buyers credit report and loan application and shop it around to multiple financial institutions to find the buyer the best loan based on his or her needs.
Note: If the buyer chooses to locate a financial institution on his or her own, each financial institution requires its own loan application and processing fees.
The buyer should be aware that the loan application approval or refusal is generally the slowest part of the deal. Most financial institutions require several documents regarding loan applications such as tax returns, pay stubs, bank statements and other documents that show your income history and your ability to pay your bills. While reviewing the buyer’s credentials, the financial institution will schedule an appraisal for the property. This appraisal will show their opinion of the market value of the property in which the prospective buyer wants to purchase. The seller must provide the appraiser the property floor plan, comparables of like property sold and a copy of the first two (2) pages of the “contract of sale”.
Note: Before agreeing on a specific loan, the buyer should ask the financial institution to put forth in writing a cost estimate of fees in order to close on his or her loan.
Tip: To avoid the potential heartache in having your mortgage loan application denied after several weeks, buyers should get pre-approved for a mortgage before looking for a house or apartment.
Complete a Board Package (Co-op/Condo) Application (3 - 5 weeks)
The seller will provide the purchaser/buyer the cooperative or condominium “Board Package” paperwork and discuss the property requirements and regulations.
Note: Cooperatives and condominiums differ in their approval process – reference section, cooperative and condominiums basics. (see Co-op/Condo info)
Potential purchasers/buyers need to prepare and complete a detailed “Board Package” containing:
a) thorough application,
b) specific financial information with statements as back-up’s (i.e. bank statements, tax returns, W-2’s),
c) personal and professional letters of recommendation,
d) a letter of employment stating job function/title, salary and length of employment and
e) mortgage information (i.e. loan application, commitment letter and *Aztec Recognition Agreement*) – if financing is involved.
Note: An *Aztec Recognition Agreement* is only required in cooperative closings. The cooperative acknowledges the financial institution’s interest by allowing the financial institution to be first in line if the buyer fails to uphold their agreement by defaulting on payments.
Submitting the Package (Co-op/Condo) (2 - 4 weeks)
Once the purchaser/buyer fully completes the Board Package application it should be forwarded to the Managing Agent of the respective property. The Managing Agent then reviews the Board Package application to make sure all information is complete and all relative documents are submitted. The Managing Agent will also perform all necessary background credit checks. The Board Package application should be very easy to read by providing a table of contents and section dividers.
Note: If all the relative documents and statements aren’t provided, the Board Package application will be sent back to the purchaser/buyer delaying its approval.
Cooperatives: After the purchaser’s/buyer’s Board Package application is approved by the Managing Agent, the buyer then needs to be interviewed by the Board of Directors. If the buyer is approved, he or she is then allowed to set up a closing date with the respective seller. The closing usually takes place at the Managing Agent’s office. As a reference, the minimum time to close with financing can take up to 90 or more days.
Condominiums: After the purchaser’s/buyer’s Board Package application is reviewed by the managing agent, it will be forwarded to the condominium board for approval. Generally, there’s no formal interview – few minor exceptions. If the buyer is approved, he or she is then allowed to set up a closing date with the respective seller. The closing usually takes place at the seller’s attorney’s office. As a reference, the minimum time to close with financing can take up to 60 or more days.
Note: The condominium board has the first right of refusal on the sale, where they would purchase the respective residential unit in question – this rarely happens.
Closing
Before the closing you will perform a walk through of the apartment or home to ensure that everything is pursuant to the deal.
All parties will agree to meet
a) for a co-op at the management agent's office
b) condo or house at the seller's attorney's office.
At the closing the seller's attorney, the buyer's attorney, payoff bank for the seller's mortgage, mortgage bank for the buyer and in the case of a co-op there will also be a closing agent from the management company.
Buyers will bring certified checks for the payoffs that their attorney will provide to them in order to close the deal. Also a buyer will need to bring their check book and photo id.
