March 5, 2019
You did it! You have an accepted offer to buy your NYC apartment! That’s a huge step but the process is just getting started. Buyers are often surprised by how much comes after this big moment but you don’t need to be! Just keep reading and you’ll have a great handle on the steps necessary to get to the closing table.
Getting an accepted offer is the first big step in buying apartment. It means you and the seller have come to an agreement about the price and rough terms of the deal. That being said, nothing is official at this point. The details of the transaction need to be worked out and due diligence needs to come back clean.
Between the accepted offer and signed contract, you or seller can walk away with no penalty whatsoever. For example, the seller can switch to a better offer or you can switch to a better apartment. That's why it's important to move quickly at this stage.
Right after you reach an accepted offer, it's time for your attorney to shine. They will be in control of the transaction and work on the contract and due diligence.
After the seller's attorney sends over the first version of the contract, your attorney will review and haggle over the details. For a normal transaction, this will be pretty straightforward. Most contracts start with the same form and there are only a few things on which both parties need to agree.
Your attorney will work hard for their money if the contract gets more complex. For example, maybe the owner will lease the property for a month after closing or agrees to do some work. The details of any such agreement needs to be included in the contract as well.
Your attorney will also review the due diligence materials. These are basically all documents available about the building and the unit. The goal of this step is to make sure you are not buying into any problems.
For example, after reviewing the building’s financials, it might become apparent the maintenance needs to increase materially. Perhaps the board minutes show an assessment is being planned because the roof is on its last legs. One of our buyer’s attorney even discovered the building was leaning into the adjacent building, causing all sorts of problems!
While this is going on, you’ll also complete the inspection, should you choose to do one. Since the inspection happens before you sign the contract, you do not need an inspection contingency. If it uncovers big problems, you simply walk away from the deal.
Assuming due diligence doesn’t uncover in any red flags, the contract negotiation goes smoothly and the inspection is uneventful, you’ll be in a position to sign the contract. When you sign, you are committing to purchase the property under the terms of the contract. At the same time, the seller is committing to sell you the property under those same terms. You'll also put down a 10% deposit at this stage.
Once the seller countersigns and returns a copy to your attorney, the property is “in contract” and you are officially purchasing the unit. Congrats!
Depending on the details of your transaction, there will be a few main items that need to happen before closing.
The first thing most buyers will work on is the loan application. It's a more in-depth version of the pre-approval process and needs to be completed before your lender will issue your loan. The contract will dictate how quickly you must submit the application. Usually that's 3 days after the contract is signed.
You'll be asked for a whole bunch of documents which will be analyzed very carefully. While you gather those documents, your lender will order an appraisal. This is when a third party visits the property and estimates its value. Why is an appraisal required? Your lender wants to make sure you are paying a reasonable price since it's their collateral for the loan.
Once your lender has all your documents and the appraisal comes back fine, you’ll be issued a “commitment letter” which says you will get the loan subject to a few requirements. This is the final deliverable of the loan application.
A question that often comes up at this stage is when you should lock in your interest rate. You want to make sure your rate lock gives you plenty of time to close. Delays happen and lenders charge to extend rate locks. Contrary to what you hear in the media, rates don't move straight up or down so locking in early does not guarantee a lower interest rate. For the nitty gritty as to why, check out our interest rate post.
For co-ops and condos, there will be an application for the building. While co-op buyers are ready for the application, condo buyers are often surprised. Condos usually have lighter applications and don't require an interview but it's not a trivial process either. Be sure to check your contract because it will say when the application needs to be submitted.
If you're buying a house, you can sit this step out. No board = no application. As long as you have the money, you’re good to go. The same can be said for sponsor units and new developments.
You can find more information about building applications in this post.
Prepare For Construction
While you won’t be able to actually start construction until after you close, you can bring your contractor by ahead of time. This will help you figure out what work you want to do and time to prepare a proposal for the building.
We probably get this question more than any other. Unfortunately we usually answer with the same unsatisfying “it depends.” Why does it depend? Mainly because there are a few black boxes along the way.
Barring some sort of issue, you’ll probably get your commitment letter within a month. We’ve seen it happen in as little as a week and sometimes it takes much longer. If you're organized and have a speedy lender, you'll be in good shape.
Where you have zero control is the building approval. While condos typically process applications faster than co-ops, there are slow condos and fast co-ops. We can make estimates but the board is a just couple people and if someone’s on vacation or you just missed their monthly meeting, you may have to wait.
Very generally, we advise clients that closing a condo should take 2 to 2.5 months and a co-op 2.5 to 3 months. If you are paying cash, it will take a few weeks less. You should leave some wiggle room though. While everyone would love to close a few days before their lease expires, it only takes one delay to make that a big problem.
Once you have your commitment letter and/or board approval, you’re ready to schedule a closing date! It's called scheduling a closing because that’s all that needs to happen - to check everyone’s schedules.
Closing usually takes place a week or two after the final paperwork is ready. Your attorney checks with the bank, management company, title company and, of course, buyer and seller to find a date that works.
Ironically, your agent who did so much to get you to this point isn't very important for the closing. They will schedule the walkthrough shortly before but are mostly emotional support at the closing table.
The closing itself is a lot of paperwork and should take 1-2 hours. At the end, you get the keys, a rebate check (if Yoreevo is your broker!) and a big pat on the back for closing on your new home!