New York City’s market is known to be a wild ride compared to the more docile, cookie-cutter markers in the US.
While there are many reasons why the NYC market has ended up becoming so complex, here are the top 3 that you’ll run into and need to understand when shopping for a home.
In most other states of the US, a real estate agent carries out the entire transaction. They help you search for a home, negotiate on your behalf, and navigate you through the closing process.
However, in NYC, a lawyer is required on both sides of the transaction, and this attorney usually handles the closing of the transaction.
This means that not only do you have to keep in mind the standard agent’s commission, but also the added closing cost of having a lawyer help you close a transaction.
A co-op is an interesting building structure that isn’t very common outside of NYC, but rather common in NYC, especially in Manhattan. A co-op functions more like a mini-company, rather than a building. Instead of buying an apartment unit which you will then own upon purchase, in a co-op, you own shares of the structure.
Usually, the number of shares you own will be directly correlated to the size of your unit, layout, which floor it is on, etc (similar to how a unit might be priced if you were to buy it).
A co-op usually also has a co-op board which you’ll have to go through to get a unit. You’d need to submit a board package to get approved before you can start living in the unit. These packages are usually very tedious, and your agent prepares them on your behalf. Note that you’d need a board package per building you’re interested in.
Condos are bougie co-ops, that are easier to deal with. Some might require a board package (if they’re a resale condo), but even then, the package is a lot simpler than if you were to get a co-op.
Since condos tend to be the more expensive versions of apartment units in buildings, you will have to watch out for the NYC Mansion Tax, which is charged on any transfer of residential real estate worth over $1 million. This tax starts at 1% on any properties between $1M and $2M, going up to more than 4% for properties more expensive than $25M.
You might think that the 4+% tax is probably never going to bother you, but given than Manhattan’s average prices are >$1M, you’re going to begin paying at least an extra $10k if you were to choose this option.
This cost is paid by you, the buyer, within 15 days of closing, and is not tax-deductible.