Buying, Renting Out and Eventually Selling Property in New York

By Wei Min Tan

Buying Manhattan Property

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.

 

Contact:  tan@castle-avenue.com

Read about Wei Min’s style in Best Manhattan property agents and Role of a buyer’s broker

Outlined below is the buying process we go through with clients.

  • Evaluate objective – purpose, long-term plan, attributes
  • Identify and arrange properties to view
  • Perform analysis and due diligence
  • Present upsides/downsides of each property
  • Negotiate
  • Recommend financing source, whether US Bank or an international bank.  Also, lenders that service foreign buyers.
  • Recommend attorney (Closing, form company)
  • Recommend  accountant (annual filings, taxes)

If financing is used, transaction 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.

Renting Out To Tenants

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.

  • Market property for rent
    • Personally, show property to potential tenants/their agents
    • Convincing presentation of property’s upsides
    • Internet marketing (Website, Broker system, Streeteasy, Trulia)
    • New York Times
    • Professional photography
    • Professional floorplan
    • Google marketing
    • Social media marketing (Facebook, Twitter)
  • Screen potential renters / tenants (FICO credit score, references, salary, work history)
  • Process paperwork
  • Arrange for tenant move in
  • Set up automatic transactions for the tenant to automatically deposit monthly rent checks into owner’s account. The tenant/landlord pays their respective brokers’ fees in the rental process.  The fiduciary responsibility  of each broker will be stated in the New York real estate landlord and tenant disclosure form.
  • On handling tenant and repair issues, we can be the point of contact, or we can refer the landlord client to a property management company.

Selling Manhattan Property

  • Price property based on market comparables
  • Market property to domestic and international buyers
  • Leverage media popularity to gain exposure for the property
  • Marketing Strategy:
    • Personally, show property to potential buyers/their agents
    • Convincing presentation of property’s upsides
    • Internet marketing (Website, Broker system, Streeteasy, Trulia, Zillow)
    • New York Times
    • Professional photography
    • Professional floorplan
    • Google marketing
    • Social media marketing (Facebook, Twitter)
    • Open houses for broker previews
    • Open houses on Sunday catering to buyers
    • Media interviews at property (as opportunity permits)
    • Broker/potential buyer exposure events at property (as opportunity permits)

Always consult your CPA or attorney on tax matters as individual situations differ.

 

Article was updated February 7, 2020

 

 

Related Articles

Best Manhattan property agents

Foreign buyer guide to investing in Manhattan property

How to invest in Manhattan property for profits

 

About Wei Min


  • Focuses on investors of Manhattan condominiums, interviewed by CNBC, CNN, Wall Street Journal, New York Times
  • Ex-Citibanker, managed $500 million portfolio
  • MBA, University of Illinois at Urbana-Champaign
  • Manhattan resident since 1999. Currently lives in Tribeca with wife and 2 kids
  • 352 burpees in 23 minutes, student of muay thai kickboxing

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