Friday, September 14, 2012

Buying a townhouse in New York

Process for buying a townhouse in New York.

Our clients who decide to buy a townhouse in New York realize the advantages of owning a building include having potential air rights, owning the land and having substantially larger space than owning an apartment.  A client may decide to buy a single family townhouse or buy a small multifamily building where they have primary residence in one unit and have other apartments within the building rented out for investment income.

The process of buying a townhouse in New York here can be interchangeable with buying a brownstone, mixed use building or multifamily building.

Interview brokers familiar with townhouses.  Buying a building is quite different from buying an apartment.  The first step is for the buyer to interview several brokers and from there, select to work with one broker.  Any good broker would have the same expectation.  One reason is that all New York brokers have access to the same inventory and by working with only one broker, it maximizes efficiency and quality of the search.

Determine objectives with your broker.  Do you intend to buy a single family or are you interested in having income from apartments as well?  While there is minimal involvement with owning a condominium, owning a townhouse entails being responsible for the roof, facade, boiler, garbage, mechanicals etc etc......  There is no handyman or super that you can call downstairs like  in a luxury apartment building.  Of course, the client can hire an on-call handyman but bottom line is that it's not as easy as owning an apartment where there is staff readily available.

Get pre-approved by a bank.  Have your friendly mortgage banker provide a pre-approval letter because you don't want to wait until you find the ideal property to get the pre-approval.

The townhouse search and viewing process entails not only looking at the living space but also looking at the outside, inside, cellar, roof (etc) of the building.  If it's a multifamily or mixed use property, the search entails looking at rental income and terms.  Air rights is obviously good to have.

Make Offer.  Review recently closed comparables and negotiate.  Well priced and good quality townhouses are in such high demand that buyers may need to make a presentation on why they are the best buyer.  The negotiation is not always about price.  

Inspection.  Buyer should have a home inspection performed preferably by a professional engineer.  The inspection would detail issues with the building.  Obviously, your broker should have some  knowledge here so that you don't depend entirely on the engineer.  By the time the inspection is performed, you would have invested a lot of time and emotion already.

Sign Contract.  Buyer signs the contract and puts down 10% as deposit.  Then it's delivered to seller to counter sign after which it's fully executed.  Until the seller counter signs and seller's attorney delivers to buyer's attorney, there is no deal which means seller can still back out and accept a higher offer.  I always set this expectation with buyer clients.  This is why acting fast in signing the contract is very important.

Mortgage Application and Appraisal.  Once contract is signed, submit the official mortgage application.  The bank will initiate the loan process and schedule an appraisal.  If it's an all cash deal, this process is skipped.

The walk through is performed about a week before the closing.  A townhouse transaction is almost always based on as-is hence the walk through is basically to make sure there is no sunken floor after the furniture has been removed.  You should expect scratches and picture frame holes on the wall since the furniture would have been removed by now.

Closing.  This is when the deal is done.  At the closing table, you become the official owner of the property.  Congrats!

Wei Min Tan is Managing Director of Castle Avenue Partners and frequently interviewed by the media such as The Wall Street Journal, CNN and New York Times on Manhattan property.

1 comment:

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