In New York, agent fees are paid by seller. Despite this, the fiduciary responsibility of the buyer’s agent is to the buyer while the fiduciary responsibility of the seller’s agent is to the seller. This will be clearly stated in the New York real estate disclosure form as required by law. If a buyer is not represented by an agent, then the seller’s agent, whose loyalty is to the seller, keeps the entire pre-negotiated commission. Hence, it is in the best interest of the buyer to have agent representation to help identify the right property, negotiate the best price and manage the entire purchase process.
All agents, through the real estate trade agreement of the Real Estate Board of New York, have access to the entire inventory of properties for sale. For example, if there are 10,000 properties for sale in Manhattan, every agent will have access to the 10,000 properties.
The role of a buyer’s agent is hence to identify the right property and not to merely provide access to view. As such, the brokerage community strongly discourages the buyer from using multiple agents as this would create confusion.
We recommend that a potential client interview several agents and then decide on one. As we will be 100% focused on helping our client identify the right property, we in turn expect client loyalty. This expectation is consistent amongst all good brokers.
Outlined below is the buying process we go through with clients.
If financing is used, closing costs (bank, attorney, accountant fees, mortgage tax, title insurance) are approximately 5-6% of loan amount. Buyers need to show required down payment, usually 20 to 50 percent of property price depending on whether the property would be a primary residence, vacation home or investment property. In addition, banks may require proof of liquidity cushion, eg 10 – 18 months of monthly payments in liquid assets.
If the buyer pays in cash (no financing), then closing costs would be about 1-2 percent of the property price.
It typically takes 3 months from property identification to closing. At closing, all parties – buyer, seller, bank, attorneys, brokers, would come together at a table. A lot of paperwork would be signed and funds would be provided to the seller in exchange for the buyer getting legal title to the property. The deal would be completed at the table and usually no future follow-ups would be necessary.
For investor clients who intend to rent out the property, the next step is to market to potential tenants. Here are the steps we perform. One of the risks of owning rental property is tenant delinquency. This means special attention needs to be paid to screening potential tenants with regards to credit quality.
Always consult your CPA or attorney on tax matters as individual situations differ.
Wei Min Tan is a property broker focusing on Manhattan, New York luxury condominiums and foreign buyers. He is often interviewed by the media including CNN, The New York Times and The Wall Street Journal on the subject of foreign buyers of Manhattan property.