FAQs: Buying an Apartment in NYC

Answers to 40 Real Questions from Real Property Buyers

1. How much does an apartment cost in New York?

 

According to appraiser Jonathan Miller and his Douglas Elliman market report, the average apartment in Manhattan in Q1 2020 was $1.89 million and the median sales price was $1.06 million. This includes both co ops and condos. Coops are less expensive than condos for a number of reasons. 

 

The average price of a condo was $2.6 million and the median price was $1.6 million, with the average price per square foot at $1,923. The average price of a coop was $1.37 million and the median price was $811K, with the average price per square foot at $1,206. 

 

New development condo prices are $2,541 per square foot. The average sales price is $3.9 million and the median sales price is $2.8 million. 

 

The luxury segment, which comprises the top 10% of transactions run over $2,600 per square foot. The entry level price for a luxury property is $3.9 million, the average price of a luxury property is $7.6 million and the median sales price is $5.7 million. 

 

Manhattan Market Report

2. What is the difference between luxury, super luxury and ultra luxury condos in NYC?

 

The word luxury is way overused in real estate. What makes something a luxury to someone might be basic to another.  In Manhattan, we refer to the top 10% of transactions as luxury apartments. The very very top of the market, say perhaps 1-2% of transactions is considered ultra-luxury. Prices for these can be in the $4,500 - $10,000 per square foot range. Super luxury starts at $3,000 per square foot.

 

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3. Is buying an apartment in NYC a good investment?

 

New York City real estate has been a good investment over the long term. For example, the average price per square foot of a Manhattan condo rose 5% compounded annually over the last 15 years. Considering, one could leverage a purchase with a mortgage, the yield would multiply. 

 

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4. Which is more important when buying an apartment in New York: location or amenities?

 

Ever heard of the saying “location, location, location”? Location is everything in real estate.

 

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5. Should I buy a condo or a coop?

 

If you are interested in buying a newer property or a property that you want to rent out for rental income, then coops are not an option. You should stick to buying a condo. If you are looking for your primary home and are not as concerned about the property being new or interested in renting it out, then buying a co op may be the right choice. Generally, co ops are less expensive than condos, but don’t have the same utility. 

 

Learn more about condo vs coop

 

NYC Coops for Sale

6. Do you need a real estate broker to buy a property in New York City?

 

Yes, you should never go it alone on the most expensive transaction of your life. There is just too much risk in buying the wrong property at the wrong price in the wrong location. 

 

Commissions are set before the property is marketed, so don’t expect to get the property for a lower price if you go directly to the seller’s broker. Instead of receiving 50% of the commission, they will likely receive 100% of the commission and have no duty to the buyer. They only have a duty to the seller. 

 

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7. Do I need to pay a broker commission when buying an apartment in Manhattan?

 

No. The seller always pays the brokers commissions. This commission paid by the seller (usually 5%-6% of the sale price) is split between the buyer’s broker and the seller’s broker. 

 

Home Buying Guide

8. Why should a buyer avoid dual agency?

 

In a transaction, real estate agents can represent a seller, a buyer or both. When simultaneously representing both in a transaction, the agent is in a dual agency situation. Dual agency is inherently dangerous because the broker is not able to offer undivided loyalty to either party. Remember, the seller’s agent represents the seller first and foremost and doesn't have full disclosure obligation. A dual agent can’t negotiate on the buyer’s behalf, can’t get them the best price, etc. 

 

A buyer, should therefore, have their own representation in all real estate transactions. Considering it is the most expensive transaction of many peoples lives, why would you trust the seller’s broker? 

9. Can all-cash buyers in New York get better prices?

 

Generally, the answer to this question is yes. But, it really depends on the seller and every seller is different. It will certainly put the buyer’s offer to the top of the list when competing with offers that have mortgage contingencies. In normal times, there are a significant number (50%) of cash buyers in the Manhattan market, so the benefits may not translate to lower prices.

 

10. How much does a terrace or a balcony add to the price of an NYC apartment?

 

There is no set standard for pricing outdoor space, as there are many variables at play. To compare the price per square foot of the property with outdoor space to a property that does not have outdoor space, we adjust the square footage by allocating 30% (or another number) of the outdoor space square footage and add it to the interior square footage. Then divide the price by the sum of the interior and allocated square footage. You then compare this adjusted price per square foot to other comparable properties without terraces. 

 

For instance, in order to compare the price per square foot of a $4,000,000 property has 2,000 sq. ft. interior square footage and a desirable 400 sq. ft. terrace to an apartment without a terrace, we need to do some math first.

 

Allocate 30% of the 400 sq. ft. outdoor space to interior (30% x 400 = 120 sq. ft.). Add this to the 2,000 interior square footage to get an adjusted square footage of 2,120. Divide $4,000,000 by 2,120 to calculate the adjusted price per square foot of $1,887. Note that Streeteasy and all the portals will show the price per square foot of interior only, so for this example $2,000 psf. They don’t account for the value of the outdoor space, but you should. 

 

Now not every outdoor space is equal. If the terrace is off the living room and has 1,000 sq. ft. direct Central Park view, you may want to allocate 100% of the outdoor space. However, if it’s a 100 sq. ft. balcony that overlooks an ugly building, you may want to allocate nothing!

 

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 11. What should I look for when buy apartment NYC?

 

 

  • A floor plan with an efficient distribution
  • Views
  • Good light - South and West are the preferable choices in Manhattan
  • Corner apartments always offer expanded views
  • If you are buying a resale, try to avoid apartments that need renovation as they can be very expensive in NYC

12. How do I find a good apartment in NYC?

 

You should have your own buyers broker to help you find an apartment. Some of us have years of experience and know all the good and bad buildings. Having an experienced broker will not only save you lots of time, but will end up saving you money too. Sometimes buyers think they take a DIY approach, however, buying a property in NYC is likely the most expensive financial transaction of their life.  This is not something to be taken lightly.  It's not the latest Apple device!  For those who go the DIY route, remember that if you deal directly with the seller's broker,  you will have to give away your right to representation as you will be in a dual agency situation, which is inherently bad for buyers and allows the seller's broker to double dip on the commission. 

 

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13. What are the advantages of buying new construction?

 

Buying a never lived in apartment has its advantages. For one, it's new so there won’t be any blemishes, scratches, etc., and therefore, move-in ready. The latest technologies are usually employed, so you will likely end up with a more energy efficient apartment. Because it is new, there will likely be lower maintenance costs for the first ten years. You may end up in building with the very latest amenities as well. 

 

New Construction in NYC for Sale

14. Is there a premium a buyer pays to buy new construction in NYC?

 

We estimate the premium to buy new development to be approximately 25% - 30%. This estimate is supported by the difference between the price psf of a new development vs the average condo (or $2,541 vs. $1,923 in Q1 2020), a 32% difference.

 

As we are in a buyer’s market, we have seen some developers reduce prices, narrowing the gap between new and resale prices. This means that now might be a good time to buy new construction, as the premium for new is trending lower (and won’t likely last for a while).

 

15. Is the premium for a new construction condo worth it?

 

It really depends upon the new development project. It’s in some way analogous to buying a new car. The difference in technology over 3 years in buying a car can be great. 

 

Over the last few years we have seen huge improvements to HVAC systems, with diffusers instead of in-wall self contained units. Also some buildings now feature air and water purification systems that did not exist a few years ago. Finally, many new buildings have LEED certification and focus on sustainability. Accordingly, to some, the premium may very well be worth it. 

16. What does it mean if an apartment is in contract?

 

An apartment goes “in contract” once the buyer and seller sign the purchase and sale agreement (i.e. the contact)  and the buyer has paid the deposit, usually 10% of the purchase price.

17. Why do I need a lawyer to buy an apartment in Manhattan?

 

Yes. In New York it is the practice that each side will have their own attorney representing their respective interests. Buyers should only use an experienced attorney that has the esoteric knowledge of NYC real estate market. 

 

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18. Do I have to visit NYC to buy an apartment? 

 

While we recommend coming for at least 3 days to tour properties, one does not need to come to NYC to purchase a property. With power of attorney or consent if buying via an LLC, everything can be done without the physical presence of the buyer. We often perform walkthroughs for our clients, find them tenants and manage their properties with them never stepping foot in the US. 

19. What are the closing costs involved when buying an apartment in Manhattan?

 

Condo buyers in NYC are required to pay closing costs of approximately 2-6%. The main components include 1) title insurance of .45%, 2) mansion tax of 1% - 3.5%, and 3) mortgage recording tax of 2.2% of the mortgage amount. 

 

If buying a NYC new development condo, it is practice that the buyer will pay the developer’s NY State and NY City transfer taxes of approx 2%. Buyers of coops, however, do not pay for title insurance or mortgage recording tax.

 

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20. Who pays for closing costs in New York?

 

Both the buyer and seller pay closing costs. The buyer will pay between  2-6% in total closing costs, as detailed in #19. Sellers will pay approximately 8%, comprising 2% in NY State and NY City transfer taxes and 6% in selling commission.

21. What is Mansion Tax?

 

Mansion tax is a transfer tax paid by the buyer on properties equal to or greater than $1 million. The Mansion tax rates range from 1% (for sales of up to $2 million) to 3.9% (for sales of $25 million or more). The name of the tax is a running joke in Manhattan real estate circles, where a studio apartment often costs more than $1 million.

 

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22. How to make an offer on an apartment?

 

The buyer’s broker will make the offer in writing usually via email (with or without an accompanying phone call).  All of the terms should be included in the first offer, otherwise there can be problems and misunderstandings that may send the deal into disarray. 

 

The offer will include not only the first offer price, but also the terms of the deal, including whether the offer is contingent upon a mortgage, the LTV ratio (if obtaining a mortgage), expected closing date and any other contingencies. In addition, we will include the contact  information of the buyer’s attorney and mortgage pre-approval letter. This strengthens the buyer's offer and shows that they are real (as there are a lot of fakes out there either playing or testing the market). 

 

Often, the seller will request the buyer to fill out a REBNY financial statement which is essentially a personal financial statement, including schedule of assets and liabilities, as well as income and expenses. The seller will use this statement to evaluate the financial strength of the buyer. 

23. What happens after you have an accepted offer on an apartment in NY?

 

Once you have an accepted offer, it is standard procedure to deliver in 5 business days a signed contract and 10% deposit to the seller’s attorney. The seller will then countersign the contract after which the buyer will be “in contract”. 

 

During the 5 business days, the buyer’s attorney will perform due diligence and negotiate the contract. Due diligence includes reviewing the offering plan, analyzing the financial statements of the building and reading the board minutes, which may provide clues to potential future expenses not previously discussed. 

 

While it is common practice for the buyer’s attorney to deliver the signed contract and deposit within 5 business days, one could extend this, although to their own peril. Because the seller is not not obligated to the deal until the contract is signed and 10% submitted, they can sell to another buyer until then.

24. Can a seller back out of a contract if they get a better offer?

 

If the purchase and sale contract has yet to be countersigned by the seller, the seller can back out of the contract without any penalty. If the contract has been executed, then the buyer would have to sue for specific performance and the courts would force the seller to keep their obligation to sell the property to the buyer in contract. 

 

In bidding wars, where the seller received many offers, the seller’s broker will hold a “best and final”, where the broker collect all the offers and make judgments about each buyer’s financial situation. They then determine which buyer would be the best for the apartment. Sometimes better terms, like all cash and quick closing, trump a higher price, as sellers want to make sure the deal gets done once they sign.

25. What is a board package?

 

Every condo or coop has a board of directors. These boards create rules for the building, including approving new buyers to the building. All boards will require some type of application that includes financial information, credit score, and other disclosures required by New York State and New York City. 

26. What is a REBNY financial statement?

 

Coop and condo boards usually require a REBNY statement to be completed by the buyer. It is essentially a personal financial statement that includes details of the buyers assets and liabilities, as well income and expenses. Supporting documents such as bank statements and investment holding statements are required supporting documents to accompany the REBNY statement. This has to be included in the Board Package once an offer is accepted.

27. What are the down payment requirements to obtain a mortgage?

 

Down payment requirements vary depending upon the lender and whether the buyer is a domestic person, a foreign national or a company. 

 

Generally, a domestic person buying a primary home will be required to pay a 20% down payment. Foreign nationals buying a second home will be required to pay 30% down payment. Investment properties for domestic and foreign nationals usually require a 40% down payment. Note that interest rates for investment properties are typically higher than second and primary homes. 

 

Private banks have more leeway in determining down payment requirements, as low as 10% and as high as 50% for very expensive properties.

 

Mortgage Financing

28. What is the difference between a mortgage pre-approval and pre-qualification?

 

A pre-qualification is a very preliminary determination by the bank as to whether the buyer can obtain a mortgage. The lender will make the assessment based on verbal indication of the level of credit, assets, liabilities, income and expenses and estimate the loan amount you are likely to qualify for. 

 

In contrast, a pre-approval is a statement from the lender that you qualify for a specific mortgage amount. An underwriter will review all of your financial information, including credit report, pay stubs, bank statements, salary, assets and liabilities to see if they meet their financial requirements. Generally, a pre-approval letter shows that your loan is contingent on two things, a) the home you choose and b) the appraised value, assuming nothing has changed with your financial position since being pre-approved. 

29. What is the difference between a mortgage contingency and a funding contingency?

 

A mortgage contingency allows the buyer to recoup his deposit if he or she is not able to secure financing for the purchase. Usually, the contingency clause will require a commitment letter by the bank within 45 days and closing within 60 days of contract signing. 

 

A funding contingency allows the buyer to cancel a contract and recoup the 10% deposit if the funding isn’t fulfilled. There are instances when a lender may pull its commitment (usually based on new information) after they issue the commitment letter. It is more broad than a mortgage contingency. Because of the high risk, funding contingencies are extremely rare in NYC, so not really an option. 

 

Note that if the buyer has a mortgage contingency and doesn’t cooperate with the mortgage process and the seller can show he or she has proof of non-cooperation, the buyer will lose their deposit. 

30. Do I have to hire a home inspector when buying new construction?

 

Before the closing, your representative will perform a walk through. For all our New Development deals, we recommend that our buyers hire a home inspector. They can more easily detect issues with construction and finishes. It's a way to make sure the developer delivers what is promised in the offering plan. Since they do this everyday, they know the difference when it comes to construction, workmanship and materials. They charge around $650 per inspection, which can go a long way. We usually accompany them on the site visit. 

31. What happens at the closing?

 

The closing is where the buyer and his or her lender forks over the funds to the seller. Title is then transferred and keys are given to the buyer. At the table will be the buyer’s and seller’s attorney, the buyer and seller (if they decide to attend), the title company representative, lender representative, the buyer’s and seller’s brokers, and occasionally, a representative from the condo or co-op board. 

 

Most closings go smoothly, however, issues can arise if the walkthrough didn’t go as planned, the seller took something they agreed to leave, there is a problem with the title or insurance, or the funds did not arrive on a timely basis.

32. How can I find out which public schools are in the area I’m looking at?

 

Fair Housing Laws preclude your real estate agent from discussing schools, but you can investigate on websites like InsideSchools and GreatSchools. 


Before you sign a contract to purchase, make sure to confirm and reconfirm that the building is in the school zone you think it is. In theory, you can find out which school a building is zoned for by calling 311 or checking the Department of Education website but due to continual rezoning, this information has not always been accurate.  We suggest calling the school principal's office to  confirm that your building falls in that school's zone.

33. What neighborhoods are most popular for pied-a-terre?

 

Midtown, Central Park and some areas in downtown are the most popular Manhattan neighborhoods for pied-a-terres. A pied-a-terre is an apartment that is not a primary residence and is instead used on the weekends and for vacations. A lot of people from Westchester or New Jersey have pied-a-terres to access the city on the weekends or even occasionally during the week after work in the city, but their primary homes are in the burbs. 

 

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34. Is buying property in New York to rent out a good investment?

 

According to the latest UBS Global Bubble Report, Manhattan property prices are supported by high wages. Accordingly, sustainable rental income is predictable, perhaps the most important factor when choosing a location to buy an investment property. That being said, yields are modest, with net yield (rent less property taxes and common charges or maintenance fees) being approximately 2.8%. 

 

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35. What is the vacancy rate in NYC?

 

Vacancy rates in Manhattan hover around 2%, which is relatively low compared to other large cities. The latest vacancy rate came in at 1.1%, as the sales market faltered over the last couple of years, more people decided to rent apartments.

 

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36. What size apartment works best for investment?

 

Generally, one- and two-bedrooms make the best investment properties, with two bedrooms edging out the one bedrooms for higher yield. While cost prohibitive, four bedroom luxury rentals do very well because there are very few of them. It is all about supply and demand...

 

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37. What neighborhoods are most popular for investment?

 

We always say the safest neighborhoods to buy in are those where New Yorkers like to live, that way there will alway be demand for the apartment. Some sections of the city, like the Financial District, don’t attract New Yorkers, so demand can change dramatically based on whether it’s in or out of favor. Neighborhoods that attract locals, like the West Village, Greenwich Village, Chelsea, Flatiron,  Soho, Noho, UES and UWS

 

ManhattanMiami Web

38. Which neighborhoods would you recommend given the price point and the fact that we are not going to use the apartment for at least 10 years?

 

In this case, one might want to choose a neighborhood that is in the process of gentrification, usually because of a rezoning or addition of a new subway line. 

 

Currently, West Soho has gone under a recent rezoning from industrial to residential and the neighborhood is rapidly changing, especially now that Google and Disney will have campuses there. Given it’s only minutes from West Village, SoHo and Tribeca, the area is very desirable and a no brainer if looking for an investment property. The same thing happened in West Chelsea along the high line, as it is now one of the most expensive/desirable neighborhoods in New York NY.

 

Hudson Yards, an entirely new section of the city built over train tracks, is another option. In 10 years, once construction subsides nearby, Hudson Yards apartments will be the place to be for a desirable location. The Second Avenue subway line has made huge swaths of the UES more accessible and will see gentrification in the easter sections of the neighborhood. Finally, the Lower East Side gentrification has already taken hold and is rapidly changing that neighborhood.  

39. Do you provide a service to act as our agent in managing the property and the tenant?  If so, what is the commission charge for that?

 

Yes. We manage many of our investors' properties and do not charge for the ongoing management. We do not handle rental receipts or payments of common charges and taxes, however, we do everything else.  Depending upon the market, either the tenant or the owner will pay the brokers commission.  In the past, it was customary for the tenant to pay 15% of the first year rent split between the tenant's broker and the landlord's broker.  If there are many units in a building, the owner may want to offer the apartment as No Fee, which means the owner pays the fee. In this case, we usually charge 1 month fee. 

 

PROPERTY MANAGEMENT

40. What are the tax implications that we need to be aware of as foreign owners?

 

The main tax issue regarding foreigners is the Estate Tax (aka the Death Tax), which is a hefty tax of close to 50% (combined Federal and State). Both US persons and foreign nationals are required to pay the estate tax. While US citizens and green card holders have an exemption amount of $5.45 million, foreign nationals have only a $60K exemption. Therefore, a buyer should do some financial planning to either eliminate or mitigate the tax. To learn more check out our Tax & Legal Issues for Foreign Buyers page..

 

Capital gains and property tax are the same for US citizens and primary residents and foreign nationals.

 

Foreign Buyer's Checklist for Purchasing New York Condos

 

NYC Apartments for Sale

 

 

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