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.

Building types
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.

Mortgage
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.

Expenses
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.

Deposit
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.

Closing costs
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.

For newcomers to the real estate market, there can be confusion about who is responsible for paying the agents involved in the transaction. As a general rule, the seller pays both their own agent and the agent who successfully brings them a buyer (the buyer’s agent). When a seller signs a listing agreement with a real estate agent, they establish how much the agents will be paid. While there is no set rate for real estate agent commissions, 6% is standard practice in a lot of places, with 3% going to the seller’s agent and 3% going to the buyer’s agent. This commission split is called a “co-broke.”

Among New York City real estate buyers, there is a train of thought that says “If I represent myself, the seller won’t have to pay a commission to a buyer’s agent. Therefore, I can expect to get the property for 3% less than what I would have paid if an agent represented me.” Or, “If I represent myself, I should be able to collect the 3% commission that would normally go to the buyer’s agent.” Unfortunately, there are some logistical and legal issues that prevent this from actually happening in practice. (more…)

With a strong buyer’s market, reduced property prices and low interest rates, it’s a great time to think about making the leap from renter to home owner. Before you decide whether or not to sign on the dotted line, here are ten things to consider:

1. Home ownership is a long term commitment. Unlike renting, which allows tenants to move every year at the end of a lease, homeowners should plan to stay put for at least four years. Factoring in closing costs, taxes and real estate fees, selling a home any sooner than four years after purchasing is likely to result in a financial loss. This number will vary from region to region and is dependent upon market conditions, but the days of buying a house and then flipping it six months later for double the purchase price are long gone.

2. Taxes. You have to pay property tax when you own a home. Your property tax is calculated by multiplying the assessed amount of your property (as determined by your local municipality) by the prevailing tax rate (also known as the “mill levy”). As a renter, you’re technically paying property tax as well, you just don’t see it because it’s built into the cost of your rent. When you own your property, you can choose to pay into an escrow account with your mortgage company and let them take care of paying the property tax, or you can pay your taxes directly to the city. You will be billed twice annually, and the cost of property tax varies dramatically from town to town and region to region. The upside to the tax situation is that home ownership is heavily subsidized by the federal government, meaning that your property tax, interest paid on your mortgage, and points paid at mortgage origination are all acceptable tax deductions. Renters do not see any tax benefits from their monthly payments, even though, as mentioned, the cost of property tax is usually built into their rental price by the landlord. For many people, their mortgage interest constitutes their biggest tax deduction. Additionally, capital improvements (permanent structural improvements or renovations which make the property more valuable) made to your property, can be added to the basis of your home to reduce any capital gain implications when you sell.  Co-op owners pay taxes as a part of their “maintenance” payment each month. (more…)

Data gleaned from RealDirect’s survey of New York City home buyers shows that only 17% want to have a real estate agent negotiate their transaction, while 45% of buyers wish to handle negotiations on their own and 38% had no preference. While today’s savvy buyer can often handle a real estate transaction without assistance, buying in a new development is a situation in which working with a broker can add significant value.

To get the most out of this type of purchase, buyers should:

1. Look for experience: Be sure to find a buyer’s broker that has extensive experience with new developments. They know where developers will typically have some flexibilty based on the amenities, trajectory of sales and market conditions. Some of the things an experienced agent may be able to negotiate for you include upgrades, price and transfer tax. (more…)