By C.S. Hsia
EVERYONE DREAMS ABOUT OWNING A PART OF NEW YORK CITY, to walk the streets of Manhattan and call it your own. Whether you are a visitor who has fallen in love with the city, or a student who has decided to settle down in the Big Apple, the real estate market is one of the most exciting and breathtaking in the world.
Before you get too caught up in the romanticism of owning property in New York City, it's best to take a step hack and approach the process with a cool head and some knowledge of how real estate transactions work in the City. For starters, it's important to find an agent that understands the real estate market, the needs and wants of Chinese buyers, who can help you filter the numerous listings and to find suitable properties. "Customarily in Asia, there is only one broker involved in real estate transactions representing both the seller and the buyer and the broker takes commission from both sides" explains Peter Wei of Town Real Estate. "A buyer's broker in the US splits the previously agreed commission with the seller's broker, which means that having a buyer's broker is completely free to the buyer." Traditionally, the broker's commission has always been around 6%, split evenly down the middle between the buyer's and seller's brokers. This number is negotiable.
The actual search usually begins with some basic geography lessons. Visiting a neighborhood as a tourist and actually living there are two different things. its essential to understand the unique characteristics that define areas within New York City. "I mostly educate them regarding different areas in Manhattan, like Eastside, Westside, Tribeca, Chelsea, and the Village etc" said Jane Tjian, of Halstead Property. Since each zone also has distinct styles of residential buildings, " I also explain to them the difference between prewar and postwar buildings ." Pre-war buildings are defined as buildings built before World War II, which feature larger rooms, wood floors, and higher ceilings, but lack modern day amenities. Most modern day new constructions are loaded to the brim with amenities, such as gyms , spas, movie rooms, or even a shared walk-in freezer to receive grocery deliveries.
Once you've decided on a general neighborhood, it's time to understand the difference between a condominium (condo) and a cooperative (co-op). In the Manhattan real estate market, apartments for purchase are roughly 70¢X. o co-op and 30 % condo. While buildings may look the same from the outside, the buying process and ongoing management of these property types are quite different.
In layman's terms, a condo building matches the traditional Chinese concept of buying property: you pay for a unit and now you own it and receive a deed for this property. Most of the new constructions in the city are in the form of condos. With a co-op you do not actually own the real estate. Instead, you own stocks representing shares of ownership in the building. "Co-ops arc generally cheaper than condos but have a lot of restrictions" explains Jeff Yi, Associate Broker at Halstead Property .
"They also have strict requirements regarding cash reserve, gift money, income, pied-a-terre, etc." These restrictions are designed to offer a good environment for the residents, but could be slightly intimidating for new buyers. In fact, co -ops require board approval of potential buyers through an interview process. Buyers must complete what's known as a "Board Package", which usually includes a purchase application (provided by the co-op managing company), signed financial statement, 2-3 years federal tax returns, bank statements, broker-age statements, reference letters. For new buyers from overseas, [his could be a daunting hurdle. However. &you're in the market for the prime pre-war buildings along Central Park West, 5th Ave . or Park Ave., almost all of them are co-op buildings. Getting approved by the board at these buildings is often considered a badge of honor.
Another difference between condos and co-ops is the maintenance fees (also known as common charges) and real estate taxes. In a condo, real estate taxes are paid directly to the City, since you are the owner of the property. In a Co -01), the building is assessed as a whole and the co-op pays the real estate taxes. 'Me owner, as a shareholder, is then charged a percentage or the taxes. This amount is typically included in the monthly maintenance bill. To encourage the development or ncw condos and co-ops, the New York Cit ƒÞ government has a 491a tax abatement program for new buyers which lowers the initial tax burden for 10 years.
through the numerical tug-of-war. "In my experience, Chinese buyers tend to he very strong negotiators," notes Lauren De Niro Pipher of Prudential Douglas Elliman . "This can work for and against you. Don't make the mistake of too low an opening bid as sellers won't take the offer seriously so you'll risk losing the deal." Another common misconception is what to expect after the seller agrees to your offer. Jacky Teplitzky, Managing Director of Prudential Douglas Elliman notes that "some buyers think if they have an accepted offer it is a done deal, but it is not the case in NYC where the offers are verbal: not signed and not binding." This is the time to work aggressively and get the paperwork signed.
Normally, when you sign the contract, buyers need to pay 10% of the purchase price. and the remaining 90% at closing. While most Chinese buyers are all cash, according to Mr. Yi, getting financing is not an impossible task. "Getting financing is indeed tougher for foreign nationals but some banks offer financing to foreign buyers. In general, foreign buyers have to put down at least 400/0 down payment." If' your plan is to pay with all cash, keep in mind any government imposed wire fund limitations, so that the deal does not get delayed. A broker with significant experience working with Chinese buyers can be quite resourceful in this matter. This would also he a great time to retain a real estate attorney to help you sort out the legalese at closing. Your broker should have many great recommendations on attorneys that specialize in international buyers.
One critical step prior to closing the deal is to schedule an inspection. The inspection process allows the buyer a final opportunity to check for any problems with the apartment and to ask the seller to make necessary repairs before closing. For new construction, the inspection process is easier and can be done by the buyer. Bring an electronic device to check the outlets, run the water (hot and cold), and test out the appliances including air conditioning, washer/dryer, fridge and ovens. Also, make sure that there are no scratches on the wall paint or cracks in the flooring and counter-tops left by the contractors when they move their tools and equipment out. For older apartments, the inspections are generally more complicated. Consult your agent for recommendations for hiring a professional home inspector.
Come the day of closing, your attorney and broker should have sorted out all the paperwork for you to sign. My final piece of advice: bring a nice pen for signing your name many times. When it's all done, grab your keys, and you may start calling yourself a New Yorker.
Friday, April 20, 2012