NEW YORK CITY REAL ESTATE FOR FOREIGN BUYERS

New York City has always provided valuable and in-demand real estate among forei
gn buyers for a number of reasons, not the least of which its prime location as
one of the world’s centers for culture, arts, and commerce. Many international buy
ers, however, may have certain questions regarding a number of areas, from how N
ew York real estate works, to their numerous options. The following is a guide f
or anyone in this situation, who is considering purchasing real estate in New Yo
rk despite being a citizen and resident of another country.
Expenses for New York Property Owners
One thing important to understand is that no matter what option for New York pro
perty ownership one selects, there will be additional expenses associated with i
t, besides just the purchase. Luckily, an owner can deduct many of these expense
s from his or her taxable income, such as real estate taxes, carrying charges, a
nd the interest that a co-op shareholder pays from the mortgage.
Real estate taxes, depending on the specific property, can amount to hundreds or
thousands of dollars. Whether you’re an owner or an investor, you should consult
with an accountant about how to decrease your taxes.
Co-op owners are charged maintenance fees each month, while condo owners are cha
rged common charges as part of their monthly expenses. These charges can range f
rom hundreds to thousands a month. The better amenities a building has, the high
er the fee is.
Condos
Another important thing to realize is that the real estate market in the United
States is extremely friendly to foreign buyers. The most popular purchases at th
e moment are townhouses and condos in New York City.
Manhattan condominiums offer wonderful, comfortable homes for families and indiv
iduals. The basic concept of a condo is that the buyer owns the apartment and sh
ares the common areas with the other building residents. Over the past number of
years, tons of new condos have been constructed in New York City, along with ol
der buildings been renovated into condos, with all of the most modern convenienc
es. For the first 10 to 25 years, often buyers can find themselves receiving rat
her sizable savings, in the form of tax relief. Over ¼ of New York’s current real es
tate are condos.
Why Condos are So Popular
While every person has to pass the approval of the board, which is made up of re
sidents who make all decisions about the building, such as rules, use, and repai
r, this process is not as complicated as in co-ops (see below), and is instead m
ore of a formality.
Condos only impose minimal restrictions on their tenants as far as ownership or
use. Sub-letting, part-time residence, and other options are allowed, unlike in
co-ops.
Condos are more expensive than co-ops but are also much more flexible and can be
more convenient. They are mostly elegant and beautifully designed, making them
fantastic investments.
Buying and selling New York condos is a relatively simple procedure, particularl
y when compared to co-ops, so they can be very enticing to international buyers.
Condos and Townhouses Versus Co-ops
It is not impossible for a non-US citizen to buy a co-op unit. It is, however, a
far greater struggle. Everyone has to pass the approval of the co-op board, whi
ch can be extremely difficult even for United States citizens, because the board
s can be discerning and demanding. Being an international purchaser adds an addi
tional layer of difficulty,.
In order to appeal to a co-op board, purchasers have to indicate that they will
be good neighbors, easy to get along with, and able to contribute financially to
the building’s upkeep. Co-op boards tend to want their shareholders to work in Ne
w York, have a nearly perfect credit rating in the United States, and to have a
United States tax return, which poses the most significant problem for foreigner
s.
The Up Sides to Co-op Ownership
Co-ops can be the perfect residence, while not suited to investors. The building
s tend to be pre-war, often pre-1920, which means gorgeous, long-lasting, sturdy
architecture, beautiful facades and details, and luxury. People can expect opul
ent fireplaces, high ceilings, dazzling gardens, and more.
There are an enormous number of options, as over 3/4s of NYC real estate is comp
osed of co-ops.
Co-ops are generally priced lower than condos, at a rate often between 10-20%. O
n the other hand, the price of monthly expenses, such as maintenance, mortgage (
where applicable), real estate taxes, and utilities, could be higher. With that
said, co-op shareholders are able to deduct some expenses, such as mortgage inte
rest and real estate taxes, from taxable income.
The Down Sides to Co-op Ownership
The approval process can be difficult and lengthy. It is not uncommon for it to
take weeks, if not months.
Someone purchasing a co-op unit is only allowed to have a specified level of fin
ancing that rarely, if ever, exceeds 80%.
Co-op usage has very specific regulations, which can have a sizable impact on th
e buyer’s life. These can include things they may not have otherwise considered in
advance, such as getting a renovation approved by the board or the number of gu
ests they are allowed to have at any given time.
An investor may want to steer clear from a co-op, because they tend to have very
stringent rules on subletting that can range from completely forbidding it to o
nly allow it once the owner has lived there for years.
The owner of a co-op unit needs to get approval from the board to sell or rent t
heir unit.
When someone decides to sell a coop, he or she will have to pay the co-op board
a “flip tax,” which isn’t a tax in a traditional sense but a payment that the seller i
s required to pay the co-op board in order to be granted permission to leave. Th
eir purpose is meant to keep speculators away.
Finding Property
The best way to find property is to contact Nest Seekers. We have access to all
of the properties available in the New York City real estate marketplace and can
take you to any and all available properties that you’d be interested in seeing.
We also provide history for each apartment, a comparable market analysis that is
thorough and detailed, and advise.
Buying New York real estate is an extremely complicated procedure that includes
presenting documents, researching the property, selecting bankers and lawyers, a
nd meeting with the brokers. At Nest Seekers International, we are experts in al
l of the most current real estate processes and procedures and will guide you ev
ery step of the way. We personalize our service for each client and promise to h
elp you get your perfect property.
Closing Costs
At the closing, both buyers and sellers have to pay the closing costs, which can
range from between 1-8% of the price of the purchase. Federal, state, city, reg
istration, and legal fees are required, along with the down payment.
When someone purchases a condo in New York City, he or she is required to pay th
e NYC Real Property Transfer Tax, which ranges from 1%, for condos which cost le
ss than $499,000.00, to 1.425%, for condos which cost more than $499,000.00.
Amounting to .4% of the price of purchase is the New York State Transfer Tax.
Falling in a range of $1500.00-2500.00 is the Seller’s Attorney Fee.
Title Ownership, as it sounds, gives the buyer his rights of ownership and ensur
es that a third party won’t ever be able to claim ownership. The cost is $450.00/$
100,000.00 of the price of purchase.
If a property’s cost exceeds $1,000,000.00, a Mansion Tax is applied, which is 1%
of the price.
Building Fees
Mortgage Loan Origination Fees can be in a range of .5%-3% of the value of the m
ortgage.
Ranging between $500.00-1500.00 is the Move-In Deposit.
Many buildings charge $200.00 Application Fees.
Running between $250.00-500.00 is the Managing Agent Fee.
The Attorney Fee is then necessary to pay the lawyer for reviewing the documents
. The fee depends on how complex the sale is, and can range from $2500.00-$5000.
00, with another $500.00 needed to pay for the recording costs.
Mortgage Tax
will mostly likely range between 1.8%, for those mortgages that are under $499,0
00.00, and 1.925%, for those mortgages that areover $499,000.00.
Lieu Search Fees are between $300.00-400.00.
Mortgage Title Insurance is $200.00/100,000.00 of the property’s value.
Credit Reports are between $30.00-100.00.
Appraisals are around $500.00 or more.
Loan Applications are around $500.00.
Bank Attorney Fees are between $1500.00-2500.00.
Misc. Bank Fees, which include escrow and home insurance, can be between $400.00
-1200.00.
New York City Real Estate Today
Real estate in New York City continues to be an enticing and safe option. Long t
erm growth and home value appreciation are favored by the enormous supply and de
mand. Though condos can be very expensive, they still should be expected to outp
erform the rest of the New York City real estate over the next number of years.
The weaker the US dollar is, the more attractive New York City property will bec
ome to foreign buyers whose currencies are stronger. Foreign interest will most
certainly contribute to further growth in New York City’s condo sector.
Although the current state of the economy is troubling to many people, many of t
oday’s trends indicate that things will continue to go well, overall, for New York
City real estate. In fact, there is a large number of wealthy buyers in Manhatt
an whose funds aren’t all attached to real estate. People who live in luxury apart
ments (which often range between $1000.00-1800.00/sq. foot), probably won’t be as
affected by the economy as most everyone else.
With the interest rates lowering, many mortgages are becoming more affordable, w
hich should motivate a large number of buyers.
Brokers
You will most likely want to have a broker, because most sellers have brokers, a
nd these brokers do not represent the buyer’s rights. They offer protection to the
seller, and so the buyer should have one, as well. The top advantages to having
a broker is that he or she can intercede on your behalf for a price reduction o
r request concession. In order to make sure you are getting the property you wan
t, and at the most reasonable price, a broker is indispensable. Without one, a b
uyer can find him or herself losing a great deal of money, due to not knowing th
e ropes entirely.
Brokers make the entire process run smoother and in a less time-consuming manner
, have access to every available New York City property, help with the presentat
ion of applications and other documents, coordinate the entire team of professio
nals that one needs in order to complete a sale, and, in short, simplify the ent
ire process.
An important thing to realize is that in New York City, international buyers don’t
pay brokerage fees. In other words, you won’t have to pay any commission to Nest
Seekers. Brokerage fees are paid by the seller and then divided between the buye
r and seller’s brokers. Real estate brokerage fee are built into the property’s purc
hase price, which means that there won’t be any additional fees for you. Once an a
partment sells, half of the real estate company’s 6% commission is given to the bu
yer’s real estate company and the other half kept by the seller’s company that liste
d the property.
Professional Team
Having an attorney is also absolutely crucial. Attorneys are needed to obtain in
surance, perform a search on the title, and research any violations or lieus on
the building, in addition to negotiating the contract, the initial agreement tha
t goes hand-in-hand with paying the deposit.
Appraisers are needed in order to research a New York City property’s fair market
value. Surveyors, as experts of the technical sides of buildings, are needed to
research the condition of the property. Architects are needed to check a propert
y’s measurements. Finally, the mortgage brokers are needed in order to help the bu
yers obtain their needed loans. Nest Seekers International will help internation
al buyers connect with all of the professionals they need to make the process go
smoothly and successfully.
Tax Abatements
Tax abatements are programs that allow taxpayers to be granted a reprieve from p
aying a certain tax for a period of time, for either a total or a percentage of
that tax. As such, they are intended to encourage real estate developers in New
York to keep building and enhancing neighborhoods. The tax status a building qua
lifies for is dependent on the specifics of any given building. Nest Seekers age
nt are able to advise an owner about the his or her property’s tax status.
Tax Exemption Program—Covering new buildings and some specific renovations.
421-A—Intended for new buildings, this program’s purpose is to phase out tax exempti
ons over a period of 10 years. Real estate tax increases by 20% each 2nd year un
til it reaches maturity. For example, 100% exempt for the 1st and 2nd year, 80%
exempt for the 3rd and 4th year, until it reaches the 10th year.
421-G—Intended for new buildings, this program applies to one specific area, namel
y below Manhattan’s Murray street. The buildings that are eligible in the area get
tax benefits for 14 years. This lowered payment applies for the first 8-10 year
s and is gradually phased out till it expires in the 14th year.
Other Incentives—Many New York City buildings can qualify for abatement periods th
at range between 15 to 25 years. A building’s eligibility will be influenced by fa
ctors including the availability of units that are reasonably priced, location,
and receiving assistance from the government in the form of grants and loans.
Obtaining a Mortgage
It is not as difficult as one might expect for a foreign buyer to obtain a Unite
d States mortgage. Most of the banks in the United States now have programs in p
lace intended for foreign buyers. International purchasers are able to finance 6
5-75% of their loans, up to $1 million and 60% of their loans that fall in the r
ange of between $1 and $2 million.
In general, foreign buyers are asked to provide a number of specific documents.
These include:
At least 4 Credit References, which must be from professionals who work in finan
ce, such as
Accountants
Bankers
Insurance Officials
Foreign Passport or Visa
Adequate Funds for Closing
Proof of Mortgage and/or Rent payments for a period of at least one year
Proof of Employment
Though some banks waive this requirement, buyers are then charged higher interes
t rates. Nest Seekers will provide you with a mortgage specialist who will get y
ou the best deal possible.
LLCs
While it can be beneficial to buy a home through a Limited Liability Company, or
LLC, the advantages for foreign buyers can be diminished by potential treaties
between the United States and that specific foreign country. An international pu
rchaser really should enlist a tax adviser who specializes in international law
to help. Nest Seekers can put you in touch with one.
Here are some important things to know about LLCs:
An LLC has to be formed in the same US state in which the property is located.
LLCs must file local, state, and federal tax returns.
Once the sale happens, the owners can transfer or sell the LLC shares to the buy
er.
There are unlimited membership requirements to an LLC. It can be composed of US
residents and non-residents.
It takes about a week to form an LLC.
Tax Liability
Tax liability for non-US residents is different than for residents. The followin
g is a short outline, which Nest Seekers professionals will help you with:
Federal Tax—For US residents, the federal tax placed on long-term investments is 1
5%. For non-residents, it is 30%.
FIRPTA—FIRPTA stands for “Foreign Investment in Real Property Tax Act.” Passed in 1980
, this act immediately withholds income tax after property is sold by a foreigne
r. The IRS takes 10% of the proceeds, and NY State another 6.85%.
Forms—NY State requires a Non-Resident Real Property Estimated Income Tax Payment
Form, while you need to submit a Statement of Withholding on Dispositions by For
eign Persons of US Real Property Interests to the IRS.
Registering Property Rights
At the time of the closing, the new buyer and his or her details are recorded by
the attorney for the buyer, who submits them in to the NYC Register. Documents
are photocopied, photographed, and filed.
Purchasing for Rental
New York City maintains a thriving market for rentals, and though the price of r
ent has increased over the past number of years, countless people are still sear
ching for rental apartments. New York, additionally, has a remarkably low rate o
f vacancy, which proves that a buyer is capable of finding and keeping a regular
tenant. The majority of buildings in New York City only offer long-term leases
(meaning they last over six months), but some allow for shorter term arrangement
s, such as month-to-month.
If you plan on buying an NYC apartment in order to rent it out, Nest Seekers Int
ernational would be happy to manage the entire process for you, including findin
g tenants for your unit, helping draw up and sign the lease, and later make sure
that the tenant is actually living there and making all of his or her required
rent payments. For a small additional fee, we can also manage your bill payments
and your tax/maintenance fees.
Our goal is to help you enter the rental business with as little stress or troub
le for you as possible, whether you can cover all of your mortgage expenses from
the income you receive from renting it out, or only part of it.
Purchasing Real Estate in New York: The Process
Organizing
Before searching for a home in New York City, a buyer should decide on
his or her desired neighborhood
the type of housing he wants
co-op
condo
townhouse
the purchase price he wants
In considering this a buyer, should decide his specific needs:
The amount of space in the apartment.
The building’s amenities.
The building’s location and proximity to local amenities.
The buyer should also consider his income level.
Financing
Prior to beginning a search for a new home, a buyer would be advised to meet wit
h a mortgage broker or banker, in order to obtain mortgage pre-approval.
Pre-approvals help improve your chances with boards of various buildings, gives
you better negotiating power, and also lets the buyer realize his spending limit
s, which he might not have been aware of.
Hiring an Attorney
Lawyers protect your interests and review all of the contracts, to make sure the
y’re good.
Nest Seekers can help you find the lawyer that’s right for you.
Talking to a Tax Specialist
International buyers really should consult with tax specialists, because tax lia
bility will be different for you than it is for United States citizens.
There will also be tax liability variations depending on if you’re buying a home a
s an investment or to live in.
You can be advised on the United States tax requirements by either
An accountant
A tax expert or
A lawyer
Preparing Finances
A deposit of 10% is always required.
Opening a bank account in the United States is recommended, or
Transferring the proper funds to a lawyer’s escrow account.
Searching for the Property and Making an Offer
Once a buyer finds the property he likes, he can make an offer on it. This offer
is not legally binding. Multiple ones may be submitted. Putting in an offer can
end up getting a buyer the home he wants for the lowest price.
Once an offer is finally accepted, the seller’s agent or lawyer will send the buil
ding by-laws and contracts to your attorney in order to review.
Negotiating and Signing the Contract
An attorney will usually take between 5 and 10 days to review a contract.
The seller’s agent will inform the purchaser of the expected time frame.
Sellers are allowed to keep showing homes and accepting offers until the contrac
t is signed.
The contract outlines all of the details of the transaction that is proposed.
Buyers need to examine the contract’s fine details with their attorneys. This will
ensure that you understand all of your obligations and risks, as outlined in th
e contract.
Once all parties sign the contract, the buyer must pay a deposit of 10%. You nee
d to either have this in a United States bank or wire the money to the seller’s la
wyer, where it will be secured in the seller’s lawyer’s escrow account.
Deposits will only be refunded under very specific conditions. One is mortgage c
ontingency, which lets a buyer receive a refund if he can’t secure some specific t
erms of financing. This clause would have to be included in the contract, but th
ey are rarely approved for inclusion by sellers.
Getting Approval from a Co-op or Condo Board
In order to buy an apartment in New York, you have to be approved by the board o
f the building, whether it be a co-op or condo.
A buyer will have to submit thorough documentation to the board, which includes
Tax Returns
References
Financial Statements
Co-ops also require interviews, which are very strict and stringently enforced.
Condos’ rules are ostensibly similar to co-ops, but they are far less difficult. T
he approval process is really more formality than the complex procedure that co-
ops require.
Preparing for the Closing
After signing the contract, one still has time in order to obtain the necessary
funds and to do appraisals, surveys, a title search, and check for violations an
d lieus on the property, in addition to reviewing documentation.
During this time, assuming a buyer has applied to get a mortgage, the bank will
check his assets and documentation, along with a building’s financial information.
Once the bank is satisfied with everything, the complete loan will be wired to t
he buyer’s attorney’s escrow account, along with the closing costs and down payment.
It is wise for a buyer to visit the property the day before the closing, just to
confirm that the property looks as the buyer expects it to, before closing.
Closing
The closing is when the transaction between the buyer and seller finally occurs.
All parties are involved in the closing, including
Sellers
Buyers
Seller’s attorneys
Buyer’s attorneys
The bank
The insurance official
Etc.
The closing occurs usually a few weeks after the contract is signed.
Everyone gathers for the signing of the final documents and for the settling of
all payments:
Title insurance
Seller’s payment
Taxes
Fees
Etc.
By the end, the buyer will have his new title, title insurance, and most importa
ntly, his keys.
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