Steps for buying property in Manhattan, New York
Posted by Wei Min Tan on June 16, 2023
Buying property in New York is a good diversification strategy for global investors. Our clients buying property here in Manhattan, New York come from countries including Singapore, Hong Kong, UAE, United Kingdom, Thailand, Taiwan, France. The main motivating reasons are (i) to diversify portfolio, (ii) preserve capital, (iii) leave for children.
This article summarizes the 5 key steps, from identifying the property to the eventual closing. The process from identifying the property to closing takes between 30 days to 3 months.
Step 1: Identify the property
Buyers should understand that all property inventory in New York is public information. Properties for sale are available through broker websites’ search function or public websites like streeteasy.com.
The first step is to get a buyer’s agent to help with identifying the right property to buy. In the U.S., an agent can represent either the seller or the buyer. In most countries, agents only represent the seller. A buyer’s agent should shortlist properties and tell you the ups and downs. The buyer can come to Manhattan to view, or view virtually, from online videos and photos. Identifying the right property is the most important step and takes anywhere from 1 week to months.
Client bought this Manhattan luxury condo at pre-construction stage.
Step 2: Present offer and negotiate terms
Once the property is identified, the buyer’s agent will negotiate the price and contract terms. This takes roughly a few days to 2 weeks. Accepting the price and terms does not mean the buyer has the property. In New York, real estate transactions have to be in writing. This means that until a sale contract is fully executed (signed by both parties), either party can back out.
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Step 3: Sign contract
Consequently, the seller’s attorney sends out a draft contract to the buyer’s attorney. The buyer’s attorney negotiates the legalese of the contract with the intention of protecting the buyer. As part of due diligence, the buyer’s attorney will review the building’s board minutes and financial statements. After ensuring that everything is satisfactory, the buyer proceeds to sign the contract and submits a contract deposit of 10 percent. Subsequently, the seller countersigns the contract. This is the point at which there is a fully executed contract and both parties are bound by the contract.
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Step 4: Board package and mortgage process
After the contract is signed, the buyer’s agent will prepare the board package for approval by the building’s board of managers. With a Condominium, the board will approve 99 percent of the time. Reason is that a rejection means exercising the right of first refusal. This requires the building to buy the property from the seller. However, in a Cooperative, it is very different. A co-op board can reject a deal without providing a reason! Preparing the board package takes about 1 week, while getting approval takes around 2 weeks.
With a condo, the board package process is just a formality. With a co-op, all parties need to hope that the deal gets approved. A rejection means all the time up to now has been wasted.
If the buyer is using mortgage financing, they initiate the formal mortgage application right after signing the contract. The buyer submits all the required paperwork to the mortgage lender, who conducts an appraisal of the property and eventually provides a commitment letter to the buyer. The main hurdle, from a time perspective, is the appraisal process.
Getting the commitment letter is the goal because if there is a mortgage contingency, it usually protects the buyer up to this point. A commitment letter means the bank has reviewed all the buyer’s documentation and has decided that it will give the buyer the loan. However, note that a commitment letter is not a 100% guarantee, as the bank will do due diligence up to the point of closing.
Step 5: Walk through and closing
The closing will occur after the board has provided approval, and the bank has provided the commitment letter. It is then that the attorneys will work with the various parties to schedule the closing date. The bank will run final reviews of the buyer’s financials and income. The walk through is the final inspection of the property and typically performed the day prior or the day of the closing.
At the closing, all parties get together, the buyer signs a lot of paperwork and after between 1 to 4 hours, the property officially transfers to the buyer.
Weimin’s article, Manhattan property market update.
What We Do
We focus on global investors buying Manhattan condos for portfolio diversification and long term return-on-investment.
1) Identify the right buy based on objectives
2) Manage the buy process
3) Rent out the property
4) Manage tenants
5) Market the property at the eventual sale