Once you’re truly interested in a property for purchase, an offer should be placed in writing on a Real Estate Board of New York (REBNY) Offer Form and a Real Estate Board of New York (REBNY) Financial Statement sheet. These two things will put your offer in prospective and will convey your offer in the most simplified way to the seller.
REBNY Offer Form lists: the buyers and attorneys contact information, the buyers work history, salary and net worth, offer amount, closing date, financing details and who the buyer has pre-qualified a mortgage with.
REBNY Financial Statement sheet lists: the buyer’s total net worth by itemizing in detail all assets and liabilities and the buyer’s total income.
Upon review, the seller has three options: a) accept the buyer’s offer, b) reject the buyer’s offer or c) make a counter-offer.
If the seller or buyer makes a counter-offer, a negotiation process will ensue concerning price, terms and closing date that will eventually lead to an agreement from both respected parties.
Contingent contracts: A contract in which the buyer will be able to receive his or her 10% earnest money deposit or contract deposit back, if he or she fails to obtain the appropriate mortgage financing after the contract is signed. Note: The buyer has usually within 30 to 45 days to obtain a mortgage and their deposit can vary to as low as 5% back.
Non-contingent contracts: A contract in which the buyer will forfeit his or her earnest money deposit or contract deposit, if he or she fails to obtain a mortgage after the contract is signed. Note: As with contingent contracts, the buyer has usually within 30 to 45 days to obtain the appropriate mortgage financing.
FACT: A Real Estate attorney is mandatory in all property transactions in New York. It’s advisable that a buyer research and interview with several attorneys before a selection is made. The buyer’s attorney should be well qualified in the residential area of the buyer’s purchase and fully understand the complexity of his or her transaction.
Accepted offer to Contract Signing – 1 to 3 weeks
Once the seller accepts the buyer’s offer, the seller’s attorney proceeds in preparing a contract of sale. At that point, the buyer’s attorney will begin to examine the buildings financials, the offering plan, the meeting minutes and “contract of sale”. A “Due diligence” investigation is conducted. Note: For houses and townhouses, the buyer should schedule a thorough inspection of the physical condition of the property- from roof to foundation.
Once the buyer’s attorney concludes his or her “Due diligence”, the buyer signs the “contract of sale”. The buyer is then obligated upon signature, to pay a 10% contract deposit of the purchase price – this deposit can be as low as 5% in some instances. The contract and deposit is then forwarded to the seller to be counter signed. The deposit is to be held in the seller’s attorneys escrow account until the official closing of the sale.
Note: Until both respective parties sign the “contract of sale”, there’s no official deal and the seller can still accept other prospective buyer’s offers. Speed is of the essence.
Mortgage Financing – 4 to 6 weeks
Before financing is involved, the buyer needs to make an important decision by either choosing to locate a financial institution on his or her own or to research and hire a mortgage broker. Mortgage brokers are independent of financial institutions and typically will take the buyers credit report and loan application and shop it around to multiple financial institutions to find the buyer the best loan based on his or her needs. Note: If the buyer chooses to locate a financial institution on his or her own, each financial institution requires its own loan application and processing fees.
The buyer should be aware that the loan application approval or refusal is generally the slowest part of the deal. Most financial institutions require several documents regarding loan applications such as tax returns, pay stubs, bank statements and other documents that show your income history and your ability to pay your bills. While reviewing the buyer’s credentials, the financial institution will schedule an appraisal for the property. This appraisal will show their opinion of the market value of the property in which the prospective buyer wants to purchase. The seller must provide the appraiser the property floor plan, comparables of like property sold and a copy of the first two (2) pages of the “contract of sale”.
Note: Before agreeing on a specific loan, the buyer should ask the financial institution to put forth in writing a cost estimate of fees in order to close on his or her loan.
Tip: To avoid the potential heartache in having your mortgage loan application denied after several weeks, buyers should inquire with their financial institution about a mortgage loan pre-qualification or pre-approval process.
Completing a Board Package Application (Cooperative/Condominium) – 3 to 5 weeks
The seller will provide the purchaser/buyer the cooperative or condominium “Board Package” paperwork and discuss the property requirements and regulations. Note: Cooperatives and condominiums differ in their approval process – reference section, cooperative and condominiums basics.
Potential purchasers/buyers need to prepare and complete a detailed “Board Package” containing: a) thorough application, b) specific financial information with statements as back-up’s (i.e. tax returns, W-2’s), c) personal and professional letters of recommendation, d) a letter of employment stating job function/title, salary and length of employment and e) mortgage information (i.e. loan application, commitment letter and *Aztec Recognition Agreement*) – if financing is involved.
Note: An *Aztec Recognition Agreement* is only required in cooperative closings. The cooperative acknowledges the financial institution’s interest by allowing the financial institution to foreclose on a residential unit if the buyer fails to uphold their agreement by defaulting on payments.
Submitting a Board Package (Cooperative/Condominium) – 2 to 4 weeks
Once the purchaser/buyer fully completes the Board Package application it should be forwarded to the Managing Agent of the respective property. The Managing Agent then reviews the Board Package application to make sure all information is complete and all relative documents are submitted. The Managing Agent will also perform all necessary background credit checks. The Board Package application should be very easy to read by providing a table of contents and section dividers. Note: If all the relative documents and statements aren’t provided, the Board Package application will be sent back to the purchaser/buyer delaying its approval.
Cooperatives: After the purchaser’s/buyer’s Board Package application is approved by the Managing Agent, the buyer then needs to be interviewed by the Board of Directors. If the buyer is approved, he or she is then allowed to set up a closing date with the respective seller. The closing usually takes place at the Managing Agent’s office. As a reference, the minimum time to close with financing can take up to 90 or more days.
Condominiums: After the purchaser’s/buyer’s Board Package application is reviewed (BY WHO?), it will be forwarded to the condominium board for approval. Generally, there’s no formal interview – few minor exceptions. If the buyer is approved, he or she is then allowed to set up a closing date with the respective seller. The closing usually takes place at the seller’s attorney’s office. As a reference, the minimum time to close with financing can take up to 60 or more days. Note: The condominium board has the first right of refusal on a Board Package application, where they would purchase the respective residential unit in question – this rarely happens.
To compare cooperatives and condominiums, the minimum time to close with financing and deal terms on home purchases can take up to 45 to 90 days.
** Before the closing, the buyer and seller should perform a walk through of the residential unit to ensure that everything is pursuant to the terms of the deal. **