How to buy real estate in the US?
Step 1: Preparation
Before you begin your journey into New York real estate, it will be helpful to get prepared so that when you find what you are looking for, you can move quickly and secure the property of your dreams. If you are getting financing, you should speak to a mortgage broker or a banker and get pre-approved for a loan before you start your search. This will not only help you learn how much you can spend but also make you a more attractive buyer and help you negotiate a better price. It is a requirement in New York to have a lawyer who can review your contract and protect your interests during the transaction. If you do not have one, your agent will be glad to recommend several to choose from including those whom speak your language. It is important to select a lawyer who you trust and who you are comfortable with.
It is very useful to speak to a good tax advisor in order to help you decide on the optimal purchase structure for your deal. Tax liability varies for US residents and non-residents, as well as whether you buy a home or an investment property. As a result, it is smart to consult with a good tax specialist, fiscal attorney or an accountant. Finally, you need to prepare your finances and set aside a 10% deposit for your purchase so that it is readily available when you need it. You may consider opening a US bank account if you don’t have one or otherwise transfer money to your attorney escrow account.
Step 2: Property search and offers
Every purchase starts with the selection process. After viewing the properties and selecting the one you really like, you should make an offer to buy it. Such an offer is not binding and you can make more than one offer to find the best deal. New luxury property developers (sponsors) however are less likely to negotiate the price and usually expect to sell their properties at asking price. Your Evans agent will always be on your side and do his or her best to get you the lowest price and the best deal! Once the offer is accepted by the seller, the seller’s agent or lawyer sends the contract and bylaws of the building (or an offering plan for a new development) to a buyer’s lawyer for review.
Step 3: Contract negotiation and signing
The usual time for your lawyer to review the contract is 5 to 10 business days (the seller’s agent of the property you choose will advise you on such time limits). Please note until such contract is signed, the Seller may often choose to continue showing the property and accept a higher offer. Terms of the contract are very important and regulate all the details of the future purchase. You should carefully go over the contract with your lawyer to understand the risks and obligations you are taking upon yourself.
Upon signing the contract, 10% deposit of the property price is to be paid. Therefore you have to make sure that you have the funds readily available in the US. One way to do it is to wire the funds to your attorney in the US. You may also open a US bank account if you wish. This deposit is kept in the seller’s attorney designated escrow account. It is usually non-refundable if a buyer doesn’t go ahead with the deal. You can however negotiate certain conditions under which you can get the deposit back. One of such conditionals is a mortgage contingency – a clause in the contract that guarantees the refund of the deposit if a buyer cannot secure financing at certain terms. It is up to your lawyer to negotiate this clause with the seller, although few sellers agree to include it.
Step 4: Coop or Condo board approval
Board approval is probably the most unpleasant part of a property purchase in New York. It is something that cannot be avoided even if you are buying an apartment in the friendliest condo building. You will have to put together a very thorough package with a lot of personal and financial information including tax returns, bank statements, personal and business references, etc. Coop board approval is a rigorous process that will usually include a personal interview. Condo board approvals follow the same procedure and require the same amount of documentation, however it is usually only a formality.
Step 5: Preparation and closing
After the contract is signed, you have additional time to secure financing and perform additional research on the property’s legal status and condition. This is the time to do the survey and appraisal, which is necessary for the mortgage. Your lawyer will be reviewing the documents, doing the title search, looking for liens and violations. If you apply for a mortgage, your bank will check all the required documents on your income and assets as well as the building financials. Once everything is in order, your bank will wire the entire amount of the loan usually to your attorney’s escrow account. At the same time your down payment and final closing costs will also be wired to the escrow account with your attorney acting as an escrow agent until the closing. The day before your closing you should do a final walk-through your new property to make sure it’s condition is as agreed and as expected.
Step 6: Closing
A closing is an actual sale-purchase transaction, which usually takes place several weeks after signing the contract. This is the time when all the parties in the transaction (seller(s) and buyer(s), seller’s and buyer’s attorney, bank attorney, title insurance representative, etc.) gather together to sign a final set of documents and to make all the payments. At the moment of the closing, your attorney will distribute all the payments including the payment to the seller, taxes, fees and title insurance and other fees are paid. In exchange a buyer will receive the new title along with the title insurance and, of course, keys to the new apartment.