The essential key to successfully buying a home in NYC is doing your homework and being able to act quickly- which involves a significant amount of preparation. This also means you’ll need to have the right people around you so having a team of top-notch professionals in your corner is essential
You’ll need to find a realtor, real estate attorney, and mortgage loan officer (you might also want to have a home inspector or contractor on hand). Your realtor and mortgage banker will be the two most crucial people to ensuring success (and saving you money) so make sure to consider your options wisely.
Once your team is assembled, you’ll want to get a mortgage pre-approval letter. This will help ensure that you act quickly, which is a necessity to present competitive offers in the New York City real estate market.
The honest truth is that NYC broker commissions are insanely high and that most buyers no longer need a broker to find a home. Over 99% of listings are online, and you can search for and find homes directly. So why exactly do you need to involve a broker who will collect a 3% commission? You can work with a buyer broker who will give you a commission rebate, saving you up to 2%. What’s even better is that thanks to leverage that 2% rebate might translate to 10% of your down payment.
So is using a rebate broker right for you? That depends, but for folks who don’t mind a tech-enabled search over the human connection of a broker, it can be a no-brainer. Rebate brokers are able to pass savings along to you due to the increased efficiency they have by leveraging technology combined with lower costs of acquiring clients (that friend of yours who’s a part-time agent at Elliman and closes 2 deals a year probably spends thousands of dollars and hundreds of hours on marketing, branding, and wining and dining clients to close those deals while rebate brokers take advantage of a straightforward and compelling value proposition- the commission rebate). Once it comes time to make an offer and close, a rebate broker will likely provide better service and results than a traditional broker thanks to their more considerable experience (most rebate brokers close multiple deals a month compared to the average agent who closes a couple deals a year).
Read our article on NYC commission rebates to learn more.
There are various schools of thought on whether to consider making an exploding offer, and there is a small minority of sellers that will scoff at receiving an exploding offer, but they nonetheless remain a great tool when utilized correctly (you’ll need an experienced buyer broker to help make a successful exploding offer).
So how do exploding offers work? Simple, the idea is to make an offer that expires (or “explodes”) before the seller can start shopping for other offers or generate a bidding war. Generally, this means making an attractive offer before the first open house is scheduled so your broker will need to arrange a showing for you ASAP. This can be tricky at times as some listing brokers may not want to show before the first open house.
You shouldn’t expect much of a discount on the price if any at all when making an exploding offer, but the goal is to close at an acceptable price and avoid a bid-war. As a rule, exploding offers make the most sense on a property you feel is underpriced, or when market conditions favor sellers. If you think the property is overpriced, there’s less incentive to make an exploding offer, but if you’re happy paying the asking price or close to it, there’s minimal risk in using this strategy. The worst-case scenario is the offer is declined, in which case you can always make another offer later, even if a bidding war ensues.
All cash offers will always be more attractive to sellers thanks to there being no risk of financing falling through as well as the speed associated with an all-cash deal. Similarly, waiving contingencies can make your offer appear just as attractive as an all cash offer. For example, if you have strong financials, waiving financing contingencies can make a lot of sense as it will give you a leg up over similar offers that are contingent on securing financing. The worst-case scenario is that the property under-appraises and you need to put up a more substantial down-payment, so this should only be considered if you can handle that risk.
If you’re buying in a larger condo or coop building, you can also consider waiving any inspection contingency. This usually comes down to personal preference, but the fact of the matter is that many buyers forego an inspection altogether. This is due to the fact that your attorney will already be performing due diligence (which should include reviewing the building’s financials, maintenance, repairs, and even board minutes for issues) as well as the fact that maintenance and repairs are not your responsibility, but that of building management. Inspections are certainly a must for townhouses or single and multi-family houses, however, and it’s not suggested to waive them. Some savvy buyers will still waive this contingency and perform an immediate inspection. This works because accepted offers are non-binding in NYC. Both the buyer and the seller can back out of an accepted offer until the property goes into contract and an earnest money check is cut. The process of going from an accepted offer to closing can take up to 10 days, so these buyers know that they can still perform an inspection prior to signing the contract.
It’s also possible to score deals when it comes to securing a mortgage. The main point is to work directly with the bank and shop around, as mortgage brokers will need to make a profit themselves, resulting in a markup. Here are a few strategies to help ensure you get the best rates possible.
The Double App- Double apping simply means applying for more than one loan. There are numerous benefits including having a backup in case the first loan falls through, but the main advantage is the potential savings. Savings can be generated by any rate drops or from added competition between lenders. It can also make the process of locking in a rate less stressful- just imagine juggling calls with half a dozen lenders the same day while trying to lock in a rate. By double apping, you can lock in a rate with a preferred lender and then continue to shop around or hedge for potential rate drops (which could easily mean a five-figure saving).
The only drawback of applying for multiple mortgages is that you’ll have to pony up some extra cash for the second application and appraisal.
Another way to save on your mortgage is through relationship rates. Banks like Chase and Citi may offer up to a .25% discount if you move your investment or banking assets over to them. This can represent a nice saving throughout your mortgage. It does typically require that you have significant liquid assets as you’ll usually be required to move a minimum of $200,000-250,000. Keep in mind that once the mortgage closes, you can likely move your assets elsewhere should you wish as the discounted rate will already be locked in.