We’ll explain in this article the process of buying a house in NYC after you’ve found a property that you like.
If you’re just starting out, please make sure to read our first time home buyer’s guide before you begin your search.
Table of Contents:
Should I Agree to Dual Agency in NYC?
As of this writing, the vast majority of NYC real estate listings are under traditional, 6% commission Exclusive Right To Sell Listing Agreements. That means the seller will pay 6% regardless of whether you are represented or not.
If you decide to go direct and forgo buyer representation, you enable the listing agent to earn all 6%. However, if you choose to have a buyer’s broker guide you through the process, the listing agent will split the commission with your buyer’s agent, typically equally or 50/50.
As a result, it doesn’t cost you anything to work with a buyer’s agent, so why would you turn down the opportunity for free advice and guidance through one of life’s biggest transactions?
Furthermore, you can reduce your buyer closing costs through a buyer agent rebate by working with one of Hauseit’s experienced partner buyer’s brokers. Our partner brokers will not only provide you with free and excellent advice on your purchase, but will also pay you $20,000 or more from their commission after closing.
On a $1 million home purchase, a commission rebate could entirely cover your NYC Mansion Tax!
Prepare Offer Documentation
Once you’ve hired a buyer’s agent, it’s time to prepare all of the materials necessary to submit an offer on a property in NYC. You may need to fill out a REBNY Submit Offer Form if the listing agent demands it, but most sellers’ agents these days are fine with just an offer by email.
Your buyer’s agent will submit your offer by email on your behalf. The email will clearly state your offer price, the target property’s address, the buyers’ names, any contingencies and how much the buyer is putting down.
Ideally, you’ve already interviewed and hired a real estate attorney so your buyer’s agent can also include your attorney’s contact information. It’s also nice to include a short paragraph about yourself, or even a home buyer offer letter if you have the time.
Besides the email, you’ll also need to attach a completed REBNY Financial Statement and a mortgage pre-approval letter from your mortgage broker or bank. If you are purchasing all cash, you may be able to get away with only attaching proof of funds (i.e. a bank statement or brokerage account showing ample funds in excess of the purchase price).
Once you’ve delivered all of the above to your buyer’s agent, he or she will keep it on file and use it to submit offers for you going forward. We’ve included a sample offer email in the next section.
Submit Your Offer to Purchase a House
Now that your buyer’s agent has all of your offer documentation, the next step in the process of buying a house in NYC is for your agent to craft a well written offer email and to send it to the listing agents.
After offer submission, your buyer’s agent will follow up with the listing agents to make sure they received the offer and to gather any preliminary feedback. You’ll need to be patient at this stage as it can take days for the listing agent to reach the seller, especially if the seller is traveling.
Please see below for a sample offer letter sent by email from one of our partner buyer’s brokers to a listing agent. Names, addresses and figures redacted or changed for privacy reasons.
Dear Mark and Jane, we are pleased to submit the following offer of $3,110,000 for 333 Fifth Avenue #5A on behalf of our client Richard Lionheart. We’ve attached a pre-approval letter as well as a REBNY Financial Statement. Rich plans on putting 20% down, but as you can see from his REBNY Financial Statement he has more than enough liquid assets to fully cover the entire purchase price.
This offer comes with a limited mortgage contingency. Rich is happy to waive the mortgage contingency when it comes to anything related to him and his personal finances (i.e. not being able to get a commitment letter because of his personal financial situation), however, we’d like to keep the mortgage contingency for anything related to issues with the unit or building (i.e. if there is something wrong with the building which prevents a loan from being made).
Please confirm receipt and let us know if we can do a deal. Rich has a month to month lease and therefore can be very flexible in choosing a closing date. Hope we can do a deal!
Rich Lionheart grew up in London, receiving a B.S. from Oxford (1982) and Ph.D. from the London School of Economics (2000), both in Statistics, with a three year stint as a visiting graduate student at Harvard. His research was about how re-thinking the conceptual foundations of quantum mechanics is relevant to the practical problem of simulating quantum systems. During graduate school he also became interested in quantitative finance – building mathematical models to better understand financial markets. His career in this field has included positions at JP Morgan, Citadel and AIG. Most recently he was tapped to build out and head the quantitative strategy group at Nomura, where he focuses on long-term investing and ways to manage currency risk arising from the firm’s North American insurance business. In his spare time, he indulges an amateur interest in Japanese history.
Attorney Contact Information
Brian Robbins, Esq. | Partner | firstname.lastname@example.org
Manhattan Office: 111 5th Avenue, 5th Floor, New York, NY 10012
Westchester Office: 18 Bexford Hill, Bedford, NY 10521
T: 212-222-4000 ext 111 | T: 917-212-1111 ext 121 | F: 212-222-1247
Negotiate an Accepted Offer on a House
If you’re lucky and happen to have submitted an offer on a property with many days on market and the seller is desperate, you may find yourself in a position of being able to negotiate or have your offer accepted outright. If the seller gives you a counter-offer, you can either accept it or counter back. It’s very common for buyers to ask to meet in the middle after seeing the seller’s counter-offer.
Alternatively, if you’ve submitted an offer on a hot property that’s slightly under priced and was just listed, you may be told that they’ve already received other offers and will be holding a best and final offer process shortly.
If you’re faced with a best and final offer auction, don’t panic and arm yourself with our guide on best and final offer strategy and tactics in NYC. Furthermore, you may wish to consider utilizing an escalation clause when submitting an offer. While rare in NYC, we have seen these used by home buyers recently.
Please remember to consult your buyer’s broker and your attorney about the effectiveness and protection that this clause will provide.
Escalation Clause: The offer price of $2,050,000 includes an escalation clause, which increases the purchase price offered to be $10,000 greater than any competing offer up to a maximum offer price of $2,125,000. Please note that the terms of the escalation are consistent with the clause provided for in the REBNY Offer Form (see below).
Purchase Price Offered in an amount equal to $2,050,000 million; provided that, in the event seller receives a bona fide third-party offer on the Property prior to the execution of a definitive contract with the Buyers and in an amount (net of any seller adjustments or credits) equal to or greater than the Purchase Price Offered (the “Competing Offer”), then such Purchase Price Offered shall be increased to an amount equal to the Competing Offer plus $10,000 and subject to cap of $2,125,000 million (this clause, the “Escalation Clause”). The Buyers must be provided with satisfactory documentation of any Competing Offer.
Contract Review and Real Estate Due Diligence
After your offer is accepted by the seller the listing agent will circulate a transaction summary, commonly referred to as a deal sheet, to all brokers and lawyers involved in the purchase. As soon as the lawyers are in touch, the seller’s attorney will send a draft purchase contract to the buyer’s contract for review.
The process of buying a house in NYC also entails ordering a home inspection upon offer acceptance. This is very important when you are buying an entire building or other free-standing property.
That’s because you’ll be responsible for the maintenance of the entire building vs condo or co op apartment owners. As a result, you’ll want to make sure that there aren’t any structural or other hidden defects that you didn’t detect upon your initial viewing of the property.
Remember to send your home inspection report to your attorney for review. Your attorney will also order a title search and review the title report on your behalf. In more suburban areas of New York, your attorney may also order a survey reading to determine the actual boundaries of your property or lot size.
If your attorney uncovers issues through any of these reports, such as liens, violations or judgments on the property from the title report, he or she will contact the seller’s attorney to negotiate to have these issues resolved before closing. While its common to expect the title to be transferred “free and clear” of any liens or judgments, it’s less common for sellers to agree to make repairs as a condition of closing.
That’s because homes in New York are commonly sold as is, and sellers are understandably loathe to do renovations in order to sell. Depending on the competitive situation, a seller could easily sell to another bidder who didn’t have such onerous requirements to close.
Please see below for an opinion from one of our partner real estate attorneys on a deal where the buyer initially demanded the seller to make repairs before closing:
I wanted to update you on this transaction. Due to the issues uncovered in the report the buyer initially wanted the seller to make repairs. I’m usually not in favor of this option as the sellers are hesitant to handle renovations and even if they agree to it more often than not it leads to disputes at the closing due to the quality of work. I had our buyer and the seller to agree to a price adjustment of $1,000 instead. Seller’s attorney sent me the updated contract a few minutes ago so we should have it executed shortly.
House Purchase Contract Execution and Deposit
After your lawyer has negotiated the purchase contract to your satisfaction and all relevant points are agreed upon by both sides, it’s time to meet your attorney to sign the contract.
Even though e-signatures are accepted and becoming more common, many buyers still prefer to meet at the attorney’s office to go over everything in person. At this meeting, your lawyer will explain and summarize what he or she uncovered during due diligence and contract review and negotiation.
You’ll then sign four copies of the purchase contract and hand over a personal check for 10% of the contract price. Please note that this is the only time during the process of buying a house in NYC where it’s acceptable to use a personal vs a certified check. Your lawyer may scan and email over the signed contract and contract deposit while simultaneously sending the original documents and check to the seller’s attorney’s office by courier.
This may be critical if the seller has multiple offers and has sent out more than one contract for negotiation. You’ll want the seller to know you are serious and that you’ve signed the contract as soon as possible if the situation is competitive.
Once the seller’s attorney has received the signed contract, he or she will endeavor to have the seller counter-sign and fully execute the contract within one or two business days. Keep in mind that offers are only binding for each respective party once they’ve signed the contract.
Because the seller is last to act, they are free to shop your signed contract and sell to someone else during this very vulnerable period for the buyer. However, most attorneys understand that it’s very unprofessional to keep a buyer with a signed contract on the hook and will get their seller to quickly counter sign.
Once the seller has counter-signed the contract, the seller’s attorney will deposit your good faith deposit into their law firm’s escrow account and messenger your lawyer back an original, fully executed contract. Once you receive a fully executed contract, the listing is technically in contract and will be listed as so on public property search websites and the NYC Multiple Listing Service.
Mortgage Commitment Letter
Once your deal is in contract, the next part of the process of buying a house in NYC is to complete the mortgage underwriting process. That means submitting any remaining documentation required to your mortgage broker or bank so they can deliver a mortgage commitment letter to you.
Although you can and should get a head start on the mortgage underwriting process before you have a signed contract, a bank can only finish its underwriting with the submission of a signed contract.
Savvy buyers will have partially finished the underwriting process before they even begin their search. That’s because their bank will already have received key documents from them such as W-2 forms and pay stubs when they applied for their mortgage pre-approval letter. It’s important to get a head start because the mortgage underwriting process can take anywhere from 45 to 90 days in NYC.
Rate Lock Your Mortgage
You can order a rate lock from your mortgage broker or bank at any point of the process. However, it’s highly advisable to only consider doing a rate lock after you have a signed contract. That’s because rate locks will expire after a certain time period, say 30, 60 or even 90 days.
You should also consult with your real estate attorney, your mortgage broker or banker and your buyer’s broker about the optimal time to rate lock your mortgage. Rates offered by your bank will fluctuate often on a daily basis, usually in correlation with the 10 Year US Treasury Bond yield.
Don’t get too caught up with trying to time the market and locking in the lowest rate. It’s more important to leave ample time for yourself so that your rate lock doesn’t expire before your closing. If it does, you may have to pay a penalty for the bank to keep your old interest rate. Alternatively, if interest rates have gone down in the interim, your bank will likely waive any fees for the rate lock expiring.
As a last resort, you can also go with an entirely different bank if your rate lock has expired before your closing. This is highly inadvisable unless you have simultaneously gone through the underwriting process with the alternate bank and are very far along in the underwriting process.
Final Property Walk Through
The final walk through is an opportunity for you to see the property one last time before closing. The final walkthrough is typically held the day before closing, or hours before the closing on the same day. You will have an opportunity to inspect the appliances, doors, outlets, faucets etc. to make sure that nothing has dramatically changed since your last viewing of the property.
Common things to watch out for are scratches or scuff marks left by the movers if the seller has moved out of the property in the interim. This is obviously less of an issue if the seller is staying post closing via a post closing occupancy or possession agreement.
Technically, the condition of the property should be the same as when the contract was executed. As you can imagine, all of this will be hard to prove or enforce unless you have written and photographic evidence. That’s why it’s highly advisable for you to document the condition of the property and take many photographs before signing the contract.
Your home inspector will do this for you, but it’s advisable that you take your own photographic evidence as well perhaps during the home inspection itself.
What to Expect on Closing Day for Your House
On closing day, you can expect to meet a slew of familiar names you’ve encountered throughout the process of buying a house in NYC. As the buyer, you’ll finally be able to meet the seller and the seller’s attorney. Your attorney will also be present, along with a representative from the title company who acts as a closing coordinator. If you’re purchasing with a mortgage, you’ll also see a lawyer representing the bank who will show up with critical certified checks to help fund your purchase.
The buyer’s broker and the seller’s broker will typically not be present, and if they do it will only be for moral support since they do not have a role at closing. In fact, brokers typically only come at the end of closing or days later to collect their commission checks! The closing will typically be held at the seller’s attorney’s office.
If the buyer’s attorney has a more central office location that is more convenient for everyone, the closing may be held there instead.
Your lawyer will guide you through the closing and review all of the documents with you before you sign them. Your lawyer will also go over your exact closing costs with you. After all of the documents have been signed and recorded and all of the checks and payments have been made, the title will be transferred and the transaction will be duly logged in public records by the closing coordinator, who is usually also a notary public.
Once everything is settled, you’ll receive a copy of important closing documents such as the deed, certificate of title insurance, the original survey and mortgage related documents if applicable. Most importantly, you’ll also receive the keys to your new house in NYC. Congratulations on being a new home owner!
Disclosure: Hauseit and its affiliates do not provide tax, legal, financial or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, financial or accounting advice. You should consult your own tax, legal, financial and accounting advisors before engaging in any transaction. The services marketed on Hauseit.com are provided by licensed real estate brokers and other third party professional service providers. Hauseit LLC is not a licensed real estate broker nor a member of any multiple listing service (MLS).