Buying New York Residential Property
- Setting Expectations
By Wei Min Tan
Bravo for taking the step towards investigating the property buying process.
Here is a summary of key points to understand when buying property in New York.
Don't expect to find a good deal from your computer 3000 miles away.
Real estate is very local. Even local New Yorkers won't know which is a good deal unless they walk the streets and visit apartments every day. You absolutely can't find a good deal from browsing online from 3000 miles away.
Everything you see online will look good because they are posted by the seller's broker. What you need to know are both upsides and downsides, the latter you won't be able to find out online.
If you are a buyer, get a real estate agent
In the US, agent commission for both sides come from the seller. However, the buyer's and seller's agents still represent the interest of their respective clients. There is no "discount" for not having a buyer's agent. It just makes the seller's agent happier since she would be getting the entire commission which would otherwise be split 50/50.
Securing the deal
In New York, a real estate contract needs to be in writing. This means, even if you have an agreed upon price with the seller, the seller's agent could continue showing the property to other potential buyers. To secure a deal, a contract needs to be fully executed - buyer needs to sign, put down the 10% deposit and seller needs to countersign. The fully signed contract then has to be delivered to buyer's attorney.
Until a contract is fully executed, both buyer and seller can back out. In a heated market, the seller could continue entertaining higher offers. Speed in getting the contract signed becomes crucial to clinching the deal.
Freehold or leasehold
The vast majority of properties in New York are freehold. Freehold vs leasehold is a British concept. It's the top question when discussing properties in the UK or Commonwealth countries. In New York, it's almost all freehold except for Battery Park and a few buildings spread around Manhattan.
Foreign buyers invest in Manhattan for its stability and global status. Many clients also buy because of a child coming to New York or the United States for college. It's almost never because they want to make enormous returns, which they know can be better realized in an emerging market. The risks are lower in Manhattan and hence the returns are lower. Property here won't appreciate 50 percent a year.
Capital gains and other taxes
Mortgage financing for foreign buyers
While many foreign buyers still buy all cash, mortgage financing is available. The major banks ceased financing to foreigners during the prior financial crisis. Then they started opening up and now, many of the major banks are financing foreign buyers. Reference our writeup, Mortgage Financing For Foreign Buyers.