FAQ’s

SELLER QUESTIONS

A contingency clause defines a condition or action that must be met for a real estate contract to become binding. It gives the buyer or the seller the right to back out of their contract under specific circumstances. For example, an appraisal contingency protects the buyer and is used to ensure a property is valued at a minimum, specified amount. A financing contingency (or a “mortgage contingency”) gives the buyer time to obtain financing up to a specified amount for the purchase of the property. A sale contingency transfers the risk of a buyer’s current sale closing onto the seller of the property they are looking to purchase. 

Inspection and due diligence are generally done prior to contract signing and are thus not added contingencies to a contract. With larger buildings, the “inspection” is often done by the attorney through their diligence with the managing agent.

Contingencies are all legal provisions in a binding contract so should be reviewed in detail with your attorney prior to signing.

HDFC’s are a form of affordable co-op housing intended for New Yorkers to live in long-term to avoid being used as investment properties that sit empty. Most came about after the city seized thousands of derelict apartment buildings in the late 1970s, began fixing them up, and allowed tenants to buy them for nominal amounts which turned them into low- or moderate-income co-ops. The majority of HDFC’s were concentrated on the Lower East Side and in Upper Manhattan, as well as throughout Brooklyn and the South Bronx. 

What sets HDFCs apart from traditional co-ops is their financial structure. Most buildings receive partial tax exemptions and subsidies to keep operating costs and maintenance charges for shareholders minimal. But the buildings aren’t regulated by the city. The individual co-op boards decide on price caps as well as flip taxes and income caps, subject to New York State Private Finance Housing Laws. 
Unless you’re in a financial situation where an HDFC is all you can buy, we generally recommend purchasing market-rate property as you can then benefit from market-rate valuation increases. Because HDFCs can generally only be sold to a limited portion of the buying population, when you sell you’re clearing a smaller market, which puts downward pressure on valuation.

The right of first refusal (ROFR) is a contractual right giving its holder the option to transact with the other party ahead of others. It assures the holder that they will not lose their right to an asset if others express interest. The right of first refusal can limit a seller’s potential profits in some cases as some buyers won’t want to negotiate only to have the deal move away from them. NYC condos generally have a ROFR to purchase a unit at terms agreed to between buyer and seller: they rarely exercise these.

Co-ops, as opposed to condos, often have rules related to pied-à-terre (i.e., part-time, second home) use of a unit. Co-op boards sometimes prefer that owners live in the building full-time so that they are able to be active participants in the activities of the building, so buildings feel lived in and not transitory, and so any damages can be discovered quickly and don’t go unnoticed for too long.

Typically the pied-à-terre rule is most strictly enforced during the purchasing process. Personal circumstances may change once you are a shareholder and some time has passed. Some co-ops are more strict than others and can force a shareholder to sell if use is not in accordance with bylaws. In our experience, this is rare.

The intention of staging is to highlight the potential of the apartment, rather than distracting buyers with the items inside, or by the condition. We want to provide the buyer with an opportunity to connect with your home, to transition from focusing on price to focusing on desire. When someone truly wants something, they will pay more. The non-financial value of real estate is not to be underestimated.

We prepare a detailed staging consultation with strategic, low-cost/high-impact recommendations. We focus on utilizing the items you have in the apartment and generally take a ‘less is more’ approach. We will most likely make recommendations on what to remove, as opposed to what can be added.

We recommend having rooms painted in a neutral color, and any plaster damage repaired before listing. We will include our handyman details so you are able to connect with them for any work you feel will be best outsourced. Unless you live in a townhouse, a building superintendent is sometimes a great option, too.

If we collectively decide the apartment would benefit from professional staging, we will bring in vendors to provide competitive quotes. Professional staging typically pays for itself. We recently sold a staged single-family townhouse, where the cost of staging was $20,000 and the home sold $250,000 above the asking price with multiple bids, as one of many examples.

We recommend a thorough deep cleaning following the staging work. The best presentation to attract buyers is not necessarily the most comfortable way to live: it’s good to keep in mind that this is a temporary situation and executed with the goal of maximizing value.

Following the preparation, our professional photographer/videographer will maximize the potential of your home: by focusing on full-room photos to emphasize the selling points of the property. Our social media expert will capture more casual and fun shots to engage our audiences on the relevant platforms.

A private exclusive listing is an off-market home that can be shared by a Compass agent directly with their colleagues and their buyers. Property details aren’t disseminated widely and won’t appear on public home search websites. The Compass Private Exclusive will only appear in the region (NY).
Private Exclusives are perfect for sellers prioritizing privacy over all else: for example, a confidential new job or relocation, family changes such as marriage or divorce, evolving financial circumstances (personal or corporate), and/or health issues.

When we successfully draw out multiple bids in the early days of marketing, when the most serious buyers are looking at your home, we recommend a “best and highest” process to maximize value. This involves alerting all buyers to the fact there are multiple bids and asking for “best and highest” by 5 PM on Tuesday, as an example. Given the early interest and the fact that the most interested buyers tend to get in soonest, we want to ensure we capitalize on that interest and engage those buyers while the momentum is strong. The market in New York City is very efficient and the best and highest process is one we use, when we can, to maximize sales prices for our clients. Value for any asset is maximized when there is competition, and this ‘blind’ bidding process unearths the highest price.

Please click on the links for estimated closing costs for condos and for co-ops.

BUYER QUESTIONS

The three most common financing options for buyers in New York City are all cash, non-contingent, and contingent on financing. Non-contingent financing means that a buyer retains the option to pursue financing against the apartment (i.e., a purchase mortgage) but does not have an ‘out’ of the purchase if financing becomes unavailable or limited. Contingent on financing means that a buyer does have an ‘out’ if a mortgage cannot be obtained in a specific time frame and amount. For the seller, the all-cash option is most attractive, followed by non-contingent financing. For the buyer, contingent financing is the least risky.

Success with purchasing an apartment in New York City depends on a number of factors. Formal offers presented with comprehensive financial information are always taken more seriously. REBNY financial statement and lender pre-approval letter to show financial qualification and borrowing capability, focusing the conversation on the presented terms. Additionally, buyers have to be approved by building boards. Thus the stronger the presentation is in regard to the board, the more leverage you have as a buyer.

Board packages are required for buyers to present to building boards in most cases in New York City. Below we list some of the most common questions we get asked by our clients. 

What is a bank reference letter or a financial reference letter? 

This is a letter from your bank. Typically indicates the age of the account, the average balance and current balance, and payment history. 

We are a couple. Do we need multiple personal reference letters for each of us? 

If both of you have a mutual connection to your reference contact, then ‘joint’ personal reference letters may be sufficient.  If you and your partner ask for separate contacts for personal reference letters, it would be best to provide one for each referrer. Your broker will work with you on selections after speaking with the managing agent and listing broker; this is ultimately dictated by the building’s board.

What is a business reference letter? 

A business reference letter is a letter from someone who knows you in a business context, for example, a client, a colleague, or a superior, who can speak to your professionalism and other criteria that may reassure a building board.

Do my references need to live in the US? 

It is desirable to have some of your references be local in order to show your roots in the community. We always recommend obtaining 1-2 more letters than you may need as far in advance as possible so that we can review and recommend the optimal content in any combination of references to maximize your chance of getting board approval.

Co-ops in New York City require a minimum of 20% down payment. However, some co-ops are stricter and will further limit the percentage buyers can finance, or even require purchases to be made in cash (the latter is more common in Park Avenue and Fifth Avenue co-ops on the Upper East Side).

Fair/Poor/Estate: The home may or may not be livable. Appliances and finishes are very dated and a full renovation is likely to be necessary.

Good: The home is livable but has not recently been updated. Appliances may be white. A throughout renovation may be required.

Excellent: The home has recently been renovated but may not be high-end throughout. Kitchen with stone counters and stainless steel appliances are likely, with minimal need for renovation to be done (if any).

Mint: The home is new or newly renovated and of interior designer quality. High-end, stainless steel appliances in the kitchen (i.e., Subzero, Viking, Miele, Gaggenau). Tasteful/neutral paint colors and finishes throughout.

"W/D available or in-unit'' can mean a few things. It can mean that a washer/dryer is already in the unit, that one is able to be installed in the unit (hookups may or may not already be installed) or that laundry is available in the building. Many older cooperative buildings do not have nor do they allow in-unit W/D. Conversely, most newer condos have in-unit W/D.

In general, we don't recommend time limits. In New York City offers are presented without legal or financial "teeth" - one party of the other can walk away without penalty at any point until a contract is signed. Presenting a time limit and having it expire despite continued interest in an apartment may reduce future negotiating leverage.

Standard real estate contracts in New York provide that certain items are expected to remain in the unit and therefore will transfer to the buyer. These can be categorized into appliances and furnishings. The general rule is that, if you were to hypothetically turn the apartment upside down, what doesn't fall out, remains.

Most large appliances such as refrigerators, freezers, ovens, dishwashers, washer-dryers, and air conditioning equipment are included and expected to be delivered in working order. Smaller appliances tend to remain if they are built-in, such as a microwave or espresso machine.

Furnishings such as window shades, window screens, Venetian blinds, wall-to-wall carpeting, built-in bookshelves, built-in mirrors, storm windows, switch plates, door hardware, lighting fixtures, and plumbing fixtures are also included unless specifically excluded in the contract.

There are some grey areas and the most frequently negotiated exclusions include chandeliers and lighting fixtures (i.e., sconces), window treatments (including curtains), window unit air conditioners, wall-mounted flat-screen televisions (the "arm" is included as it's attached) and audio-visual equipment, closet-organizing systems, and outdoor space plants and furnishings.

It's important these items are clear in the contract.

Under section 1031 of the US Internal Revenue Code, a taxpayer may defer capital gains and related federal income tax in exchange for certain types of investment property. This process is commonly known as a 1031 exchange. The properties being exchanged must be considered of like kind in the eyes of the IRS in order for taxes to be deferred. The 1031 process requires careful attention to specific rules in order to obtain the benefit and it’s thus best to loop in a 1031 expert / or your attorney as early as possible. Always consult your tax or wealth advisor; licensed professionals can address impact based on your specific situation.

REBNY statements are used by brokers and sellers to qualify you for a purchase. They also ensure we are focusing on appropriate properties (i.e., within the right value range) and that we can get ahead of any questions up-front, maximizing the leverage we have in a negotiation. The numbers provided in the REBNY will need to be substantiated in the board package after a contract has been signed.

Co-ops have different metrics for evaluating the financials of prospective applicants. A general rule of thumb is that your debt-to-income ratio (DTI) should be under 25% and that your liquid assets post-close should be enough to cover a minimum of three years of debt payments.

The REBNY statement is important when buying a condo as well. Although the condo board does not have the ability to decline a sale based on your financials, it is important to provide the seller with the comfort that you are able to close the deal and are able to make your mortgage and common charge payments.

Discretion is a core value of JHT: we keep the REBNY statements confidential and only share them in conjunction with offers submitted on your behalf.

• Location: what neighborhoods do you prefer?

• Price Point: what price would you like to stay below?

• Size: what is your desired number of bedrooms and baths?

• Condition: are you open to renovating or are you looking for an apartment that is move-in ready?

• Building Style: do you have a preference for pre-war or post-war? Are there any other features we should consider in our search?

• Building Type: are you interested in both co-ops and condos?

• Amenities/Other: do you prefer a doorman or elevator? Are you open to walk-up buildings? Do you have any pets?

• Purchase Structure: will you be financing the purchase and if so, what percentage will you put down? Different buildings have different policies, so it is helpful to understand how you plan to structure the purchase from the outset

• Team: do you have a mortgage professional and an attorney in place? A contractor if needed? If not, we are happy to introduce you to our resources

• Pre-Approval: Do you have a pre-approval letter from your bank? We recommend you obtain this as soon as possible to ensure you are comfortable with the monthly costs, and to assure the seller you are qualified

Collections is a curated visual workspace provided by Compass where we can easily organize the homes you want to see and discuss them together. It will help you to keep track of the homes you like and save them in one place. It allows you to collaborate with your spouse, parents, or friends by allowing them to join your search. Lastly, you can receive automated price and status updates about the homes in real-time.

In order to present a qualified bid for an apartment we will need a REBNY statement from you, a mortgage pre-approval letter, and the terms of your offer (price, financing percentage, financial contingencies, requested closing date, etc).

Your REBNY statement and/or pre-approval letter or proof of funds will help us to underscore your qualifications and your ability to close smoothly. We will explain the comps that support your offer in regard to the perception of value (i.e., condition, views, and other points pertaining to the home). Lastly, we combine the above with your bio (optional) to illustrate that you are a qualified and serious buyer. The end goal is to provide comfort you are fully qualified to close, which focuses the seller only on the terms presented, increasing your negotiating leverage.

1. Being invited to the interview is a good sign. The interview is the board's opportunity to meet you and ask specific questions about your application. The style can range from an informal gathering of board members in an apartment or on a Zoom screen to a formal interview with board members lined up at a table with you in the hot seat. 

2. Dress up and be prompt. A board interview should be treated no differently than a professional job interview, whether in-person or online.

3. Prepare for a lack of privacy. The board has great latitude in the kinds of questions it can ask, as long as they do not broach any protected classes (of which financials are not one). Be prepared for this and do not avoid answers to personal questions, or be surprised by this intrusion.

4. Know your application. You should be able to quickly and concisely answer any questions asked regarding your application, preferably without having to look at your application. However, if necessary, have a copy handy.

5. Couples should decide in advance who will answer what types of questions. For example, you may agree to answer all financial questions and your spouse will answer all other questions. Avoid discussing answers to questions with your spouse in front of the board.

6. Unlike a job interview, do not try to sell yourself. Only answer questions asked and let the board run the show. Boards rarely turn down applications for being too boring.

7. Never volunteer information or engage in unsolicited conversations except for basic cordial remarks and greetings.

8. Do not ask questions. Questions can often unintentionally convey negative information to the board. For example: "Do you have any plans to renovate the lobby?" is the kind of seemingly innocent question likely to offend the board member who was in charge of the last lobby renovation. If you have any additional questions you can direct them to your real estate broker or your attorney.

9. A short interview is better than a long one. While there are no hard and fast rules, a short cordial interview with a few board questions and remarks is often the best board interview.

10. Do not expect an answer at the end of the meeting. Most boards do not give their decision until a day or two after the meeting. Your real estate broker and your attorney will take the necessary steps to determine if you have been approved.

The co-op and condo application processes have grown more and more similar over time. The main difference remains: a co-op can turn down a buyer for any non-discriminatory reason, whereas a condo can only prevent a purchase by exercising their right of first refusal and purchasing the unit at the same terms as you would have. The latter is quite rare because most buildings don't have funds for or an interest in pursuing this course of action. Still, it is necessary to complete the forms and follow the steps of the board package assembly and review process in order for the purchase to proceed. We will work with you to protect your information, including redacting sensitive information such as social security numbers from copies of the package that are distributed to the board.

The choice of mortgage professional you work with is entirely up to you. That said, we strongly recommend that you work with a seasoned New York City mortgage professional who understands the New York City real estate market with all of its unique quirks. We are happy to provide the names of mortgage professionals with whom we work regularly and trust that can close your deal at favorable terms.
It is also beneficial to identify an attorney early in the process as they can answer your legal questions and get in front of any important and potentially time-consuming paperwork. Presenting a seasoned NYC real estate attorney with an offer will also underscore your seriousness and maximize negotiating leverage. You can work with whomever you choose; again, we strongly recommend you work with an experienced New York City transactional attorney as there are many nuances in our market that can trip up uninformed parties and negatively impact deals. We are happy to provide the names of three attorneys with whom we work regularly and trust.

• What is your process, particularly in regard to due diligence / how do you work?

• Will I be working with you directly or with your team?

• What is your availability? Weekdays only, evenings, and weekends?

• How fast can I expect responses to emails, voicemails, etc?

• What are your fees, and are they flat or hourly? What is included, and what is additional?

• How much experience do you have with new developments?
  
  

Please click on the links for estimated closing costs for condos and co-ops.

GENERAL QUESTIONS

In most US real estate markets, apartments come in the form of condominium ownership. In New York City, approximately 60% of the housing stock is cooperative. The main differences between the two types of structures are listed below. 

• When you buy a condo, your apartment, as well as a percentage of the common building areas, belongs to you. When you buy a co-op, you don’t own your apartment. Instead, you buy shares in the corporation that is the building, and that gives you the right to occupy the apartment.

• Condo prices tend to be higher than co-ops for three main reasons: there are fewer of them, they don’t have underlying building mortgages (which most co-ops do), and they offer more flexibility in use and in the financial profiles of who buys them. Co-ops have lower prices, lower average monthlies, and generally lower closing costs, and the approval process with a co-op involves greater scrutiny.

• Condos generally allow subletting, while only some co-ops allow subletting and generally only after a number of years of ownership.

• Some co-ops do not allow purchases in other than a personal name; condos allow entity purchases.

• Co-ops can turn down a purchase for any non-discriminatory reason; condos can only impede a purchase if they exercise their right of first refusal.

Flip taxes, otherwise known as transfer fees, are most common in co-ops but condos also have them. They are an amount charged by a building whenever a sale happens and are used to build the reserve fund. All buildings need funds to run and generally have three main sources of income: maintenance/common charges, assessments, and flip taxes. We are fans of reasonable flip taxes, as property with lower maintenance and a reasonable flip is more marketable than one with higher maintenance and no flip. 

The typical co-op flip tax in NYC is 1-3% of the sale price, but the specific flip tax calculation varies by building. It is typically documented in the building’s financials and typically paid by sellers. It’s important to note that any flip tax payable on a sale is an additional closing cost on top of the standard NYC and NYS transfer taxes paid by sellers (unless negotiated otherwise).

Flip taxes in NYC can be structured in any of the following ways:

• Percentage of the gross sale price

• Set dollar amount per co-op share owned

• Flat-fee

• Percentage of sales profits

• Hybrid e.g., $2,000 plus $25 per share if an apartment is owned for more than five years

Although flip taxes cannot be avoided if the building charges one, they can sometimes be negotiated between buyer and seller. 

In NYC the entire process for a financed purchase from contract signing to close typically takes 60-75 days. ‘On or about’ closing dates are standard in NYC and give either party 30 days to adjourn without penalty. We advise that you confirm this and all contract terms with your attorney as we get to the contract stage. Disclosing intention upfront avoids angst later on. Presenting ‘standard' or ‘flexible’ closing time frames is ideal because it allows for negotiation to focus on price rather than timing. If conversely an extended or fast close date is required, we will communicate that to the other side.