If, as an expatriate or foreigner, you desire to buy a property in New York City it is quite easy for you to do so. In fact, in recent years foreign buyers have been quite active in the real estate market in New York City as the fluctuating US currency has made this market extremely attractive for foreigners who are on the lookout for investment properties. It is not the only investment that drives this real estate demand as expatriates who relocate to the city often feel that they should invest in building an asset that is bound to appreciate in value rather than spend hard-earned money on rent.
Luckily for these foreign buyers, the real estate market in New York City has always welcomed foreigners and the city’s many real estate firms and agents are quite used to dealing with buyers who belong to different nationalities. There are no real restrictions and any type of property in New York City can be purchased by a foreigner. Historically, however, new construction and regeneration condominium projects have always been favored by foreign buyers as they offer excellent value and the best prospect for capital appreciation.
Moreover, condominiums are favored by foreign buyers because these units can generally be easily rented out if the owner decides not to stay in the unit. Further, many condominium developments in New York City also enjoy generous tax abatements. Tax abatements are reduction in real estate tax for residential rehabilitation or the conversion of multiple dwellings designed to encourage investment. The City of New York offers tax abatements for periods as long as 10 to 15 years for specific types of new developments and regenerations and this often translates as a lower cost of ownership which attracts foreign buyers.
Buying a property in New York City requires as much research and homework as buying a property in any part of the world. New York City is a city that has an extremely vibrant and active real estate market that is always buzzing with activity regardless of the economic climate that surrounds it. (During the current economic downturn, sales seem to a bit slow while the rental market is on fire). Outlets of real estate agents are located on every street corner in New York City and publications like the New York Times and even the free daily newspaper, the Metro, offer much advice and have listings of homes and apartments which are routinely offered for sale in New York City.
Before you buy your home in New York City, however, you should try and align yourself with three key persons, a real estate broker, a mortgage broker and a real estate attorney.
Real Estate Broker
The best way to find a good real estate broker is to ask for referrals from your friends, neighbors and colleagues. A good real estate broker should specialize in the neighborhoods where you have a desire to live and also keep you informed about new listings.
Apart from information and listings, a broker will also help you negotiate the somewhat complex process of buying a home in New York City.
Mortgage Broker
The second key person in your transaction is a mortgage broker; many buyers in New York City enlist the help of a mortgage broker rather than going to a bank themselves.
Mortgage brokers are not lenders (although in some instances, they can act as the lender), rather they arrange and negotiate the conditions and terms of loans from lenders (banks) on your behalf. There are many advantages to using a mortgage broker as they usually help to evaluate your financial situation and pre-qualify you for the loan amount that you can afford and even calculate your mortgage payments. As a general rule, banks provide finance for up to 70% for foreign nationals, (those who do not have a U.S. residency or an acceptable work visa) and up to 80% for Non-Permanent Residents. Financing, of course, depends on the buyer producing the right documents which are acceptable by US banks.
If the foreign buyer does not have a US residency or an acceptable work visa then he/she has to produce an acceptable international credit report and letters of credit from banks or other sources to show credit history. A credit overview generally requires a 24 month history. If the buyer is already living in New York City on a work visa then he/she has to generally furnish the following documents in order to qualify for a loan.
- Verification of income for 2 previous years – Self Employed or Salaried Tax Returns
- Bank statements – 2 months
- Copy of passport and visa
- Copy of 2 major credit cards, front and back
- A mortgage account statement showing one-year payment history (if you have another asset in your home country, anything, in other words, that can substantiate your file )
- Payslips for one month
The bank that you approach through your mortgage broker will then most likely run a confidential credit check on you before they consider advancing a loan to you. There are various types of loans that are available in the mortgage market currently.
Types of loans
Fixed-Rate Loans
These loans are the most common of all loans and the interest rate for these loans is set before you close the loan and remains fixed for the entire duration of the loan. 30 year fixed rate loans are the most common type of loans as the monthly payment will repay the loan amount completely by the end of the loan term.
Adjustable-Rate Loans or ARM
These loans differ from fixed-rate loans in the sense that the interest rate and monthly payments on these loans change with the fluctuations in the market interest rate. Most ARMs have an initial interest rate during which the borrower’s interest rate does not change for a certain period, after that interest rates change annually. Some buyers prefer these kinds of mortgages as they tend to benefit when the market interest rates fall.
Interest Only Loans
An interest-only loan allows you to pay only interest for a set period of the loan time. You do not have to pay any principal during that time. When the interest-only payment period terminates you will then have to pay higher monthly charges as you pay the principal over the remaining term of the loan.
Mortgage Companies
Preferred Empire Mortgage Company (http://www.pemc.com/) call +1 212 692 8402
Banks
Wells Fargo ( https://www.wellsfargo.com/) call toll-free at 1-888-844-1594
Chase Mortgage (http://mortgage.chase.com/) call toll-free at 1-800-873-6577
HSBC Mortgage Services (https://www.hsbcmortgageservices.com/home) call toll-free at 1-800-698 – 5542.
Mortgage rates change often and are updated on the websites of all lenders regularly. Mortgage rates currently range between 5% to 6% ( August 2009) depending on the type of loan, the duration, and the creditworthiness of the individual.
Real Estate Attorney (Lawyer)
It is imperative to hire the service of a real estate attorney who is licensed to practice in the State of New York when you are thinking of buying a property in New York City. A lawyer is needed to perform a due diligence review of the property before you sign any papers regarding the purchase of a property. If you are working with a real estate broker or a real estate agent, they can perhaps refer a real estate attorney who will look after your needs. Alternatively, you could use a service like (http://www.ilawyer.com) which is a national network of non-profit Lawyer Referral Services operated by the local Bar Associations in New York, California, Texas, and Kentucky. This service helps individuals to find a lawyer for various issues.
Process of purchase
The process of purchasing a property in New York City typically involves perusing published real estate listings and going to ‘open houses’. Open houses are viewings of properties that are arranged by real estate agents. Real estate agents are sales agents who are normally aligned with big real estate firms. You should try and go to as many open houses as possible. If you are working with a real estate broker, you should leave the contact details of the real estate broker at the open house as your real estate broker will then be able to negotiate with the property’s real estate agent if you are interested in the property. If you don’t have a real estate broker, you can always choose to work with the real estate agent who has the listing of the particular property that you have viewed and liked.
Once you have decided that you are interested in purchasing a particular property then your real estate broker will submit your offer to the seller. Often the seller already has stated a selling price but you are under no obligation to accept this price. Most sellers expect some amount of negotiation and this negotiation is usually done by your real estate broker. In the case of new developments, they usually have a published price list from which there is little or no negotiation (though this has somewhat changed under current market conditions and you can also negotiate with the sales offices of new developments).
After a price has been determined between the buyer and the seller, a contract of sale is then established between the two parties. Once the seller has accepted your offer, your attorney should be informed as the seller’s attorney will then typically draw up the contract of sale which will spell out the rights and obligations of both parties that are involved in the transaction. The seller’s attorney will then forward this contract to your attorney. Your attorney will then review the contract and explain the terms and conditions of the contract for you. Your attorney will also give you an estimate of the closing costs which will be involved in the transaction. Once the terms of the contract are accepted by both parties, both you and the seller will sign the contract.
Your attorney then sends a copy of this contract to your mortgage broker who requires this document in order to process your loan application. Once you receive the loan commitment letter your attorney will then order a title report if you are buying a condo property or a house or a lien search if you are buying a coop. (When you borrow funds to purchase a coop, the stock certificate and proprietary lease allocated to your apartment are pledged to the lender as security for the loan. A Uniform Commercial Code Financing Statement (UCC-1) is then filed with the county where the coop is located so then the lender has a lien on the stock certificate and the proprietary lease).
If you are buying a house, your attorney will schedule a closing as soon as title conditions are resolved and you have a clearance from your lender to close the loan. If you are purchasing a coop or a condo you will have to wait until you have received the necessary approval from the coop corporation’s board or condominium board.
While you wait for your loan commitment lender, your real estate broker will probably help you put together a package that is required for receiving approval from a coop board.
This package is usually accompanied by a personal interview with the coop board. A coop board package is put together and sent to your real estate broker within 10 days of the receipt of a signed contract or with three days from the receipt of a bank commitment letter.
A coop board package usually requires the following documents:
- Last two years federal income tax returns,
- The bank’s loan commitment letter
- Three to five personal and business reference letters,
- Bank statements,
- Net worth statements from your accountant,
- A landlord reference letter, if you have been renting previously
- Employment verification letters or pay stubs,
- Brokerage account statements
- Credit check authorizations.
- Copy of your passport
Sometimes a condominium board requires as much information as coops do and it is necessary to have all these documents ready before you even think of starting the process of buying a property.
If you are obtaining financing and are purchasing a house or a condominium, you can generally expect to close within 6 to 10 weeks after the signing of a contract. In the case of a coop, you can expect to close within 8 to 12 weeks from contract signing. This extra time is needed to fulfill the requirement of a personal interview of the coop’s board of directors.
After all the approvals have been received, your attorney can schedule a closing with the seller’s attorney, the lender’s attorney, and the managing agent of the building. Your attorney will also prepare a statement of the checks required at the closing and you will be expected to attend the closing with your attorney. After the closing, your attorney will provide you with a final closing statement and copies of all documents that you signed at the closing.
