Sotheby's International Realty Donna Stockman

The Purchase Process

Whether you’re interested in a condo or coop, the steps to purchasing a Manhattan home are very similar. Here’s a basic overview of the process…

1. Determine what you can afford.

If you will require financing, you should speak to a mortgage banker and get pre-qualified as soon as you consider buying. You must know how much you can spend before you can spend it. Simply give information over the phone to a mortgage broker or banker to get an idea of how large a mortgage you can support. The banker will give you a verbal indication of the amount that the bank would finance. If you do not have a mortgage banker, I can provide referrals.

2. Obtain loan pre-approval.

Once you become more serious about buying a home in New York City, you should obtain a pre-approval in the form of a written letter from the bank. Remember though, that if you are considering purchasing a coop, you may qualify for a bank loan but not be approved by the coop board. Selection of a reputable mortgage banker who understands the process and intricacies of New York City real estate, particularly if you are buying a coop, is essential. I can assist you.

3. Work with Real Estate Broker.

The first thing a seasoned broker will do is qualify you. Even if you have a pre-approval from a bank, you may not pass a coop board. Each coop board looks at two important financial ratios: your post-closing debt to income ratio and your post-closing liquidity. To calculate those ratios, your broker will provide you with a REBNY Financial Statement form to complete. This is the standard form used by all NYC brokers and is submitted with your offer so that the selling broker can determine how strong a prospective purchaser you are and whether you can pass the board.

Most coops look for a post closing debt to income ratio of 25%.  Some coops will not consider a prospective purchaser with a ratio higher than 25% and some will consider a higher ratio on a case by case basis. Your broker will be able to determine the total monthly, maintenance plus mortgage, that you can afford. Some coops require 6-12 months liquidity, some 18-24 months, some three years and the most stringent require liquidity equal to or greater than the purchase price. It is your broker’s responsibility to understand the building’s requirements.

Another important consideration for a purchaser is to consider the financial strength of the building. Before making an offer, it is important to ask for and review the building financials. It is also important to ask about the age of the major building systems: roof, facade, boiler, elevator etc to determine whether there may be upcoming capital expenditures and whether there are sufficient reserve funds for such expenditures.

4. Place a bid.

After you find the property on which you wish to place an offer, I will work with you to decide what to bid. I will show you comparable sales analysis to assist this process. The bid will include not only the dollar amount of the offer, but also contingencies, including financing and proposed closing. The offer, together with the REBNY Statement will be submitted by me to the seller’s agent.

5. Negotiate with the seller.

The seller may “counter” your offer. This will begin a negotiation process that will eventually lead to a “meeting of the minds,” at which price point, terms, and closing date have been agreed upon. I will represent you in the negotiation process. As a Certified Negotiation Expert, I have the experience and the necessary training to obtain the best possible results for you in the negotiation process by communicating effectively to uncover more information from the seller, work through deadlocks, and ensure you have a full understanding of your options.

6. Secure legal representation.

Contact a real estate attorney familiar with real estate in our area to represent you. The seller’s attorney will begin preparation of a contract of sale, and during that time your attorney will begin due diligence on the financial condition of the building in which you wish to purchase. If you do not know a NYC Real Estate attorney, I can provide referrals.

7. Sign the contract.

After your lawyer concludes that the financial condition and bylaws of the building are satisfactory, and that the contract of sale is acceptable, he or she will allow you to sign the contract. At that time you will usually be required to present a deposit of 10% of the purchase price. The contract will then be forwarded for signature by the seller with the deposit. This money will be held in the seller’s attorney’s escrow account until closing. It is important to note that until all parties have signed the contract, and it has been delivered, the seller can still show the property and entertain and accept other offers. There is no deal until all parties have signed!

8. Complete application or board package.

If financing, you will move forward with your loan application in order to obtain a firm commitment letter from the bank. If you are purchasing property that requires a board application, you will be given the purchase application for the building, sometimes known known as the “board package.” The application materials can be similar for a cooperative and condominium. The required materials typically include: an application, a financial statement, all requisite support for your financial statement, two or three years of tax returns, bank statements, letters of personal and financial reference, the contract of sale, and bank documents (if financing) indicating that your loan is in place. If you are purchasing a coop, please refer to the page “Coop Board Approval” for my thorough guide to the coop approval process.

9. Undergo application review and interview.

In the case of a cooperative, if your application meets initial approval, you will be invited to be interviewed by the Board or by an interviewing committee. Please take this meeting seriously. It should be treated as a business meeting (refer to “Coop Board Approval” for additional information). In the case of a condominium, there is generally no formal interview. Your application will be reviewed, and if all required materials are included and in order, an approval is typically granted.

10. Close the sale.

The purchase process generally moves faster for a condominium. Assuming a loan can be secured in a timely fashion, you can move from contract to closing in about 60 days. However, the cooperative process is more involved, and 90 or more days is not unusual. If you are not financing, the closing can occur more quickly, even as soon as a month. Remember though, the process of purchasing a home in New York is a highly variable one—I have worked with clients who have found a property in a month, and some have taken up to six months. Typically, I recommend allowing no fewer than six months if you are planning to finance.

Special considerations for foreign buyers…

If you are a foreign citizen you should consult with legal and financial advisors prior to embarking on this process. There are attorneys and accountants who specialize in assisting non US citizens navigate the complex tax, estate and legal considerations. I can assist you in finding someone. Sotheby’s also has a relationship with HSBC to assist foreign purchasers who wish to finance.