Buying a home in NYC can be an overwhelming and intimidating experience. You will be faced with intense competition from other buyers and tasked with understanding the difference between condo and co-op apartments. As a buyer, you will also likely be inundated with various ‘tips’ from some of the 50,000 agents who operate in New York City.
Amidst the frenzy that is NYC’s real estate market, it’s often hard to know what the best strategies are for saving money and ensuring you achieve the best outcome.
Here are five home buyer tips which most buyer’s agents in NYC won’t tell you:
1. You can save money by requesting a buyer agent commission rebate
One of the most effective ways to save money when buying a property in NYC is to request a buyer agent commission rebate. Because rebates result in brokers earning less money, this method happens to be one of the best-kept secrets in New York City real estate.
In short, a buyer agent commission rebate is a cash incentive which is paid to you at closing by your buyer’s agent. Real estate commission rebates work in New York City because sellers usually agree to pay the same total commission regardless of whether you as the buyer are working with a buyer’s agent.
By representing you on the purchase, a buyer’s agent collects half of the total 6% average NYC real estate commission which would otherwise go to the listing agent. Your buyer’s agent is then able to offer you an automatic discount on the purchase by sharing a portion of this commission with you in the form of a cash rebate at closing.
Commission rebates are completely legal in New York and actually encouraged by New York’s Attorney General as a means of promoting competition.
2. It’s not always necessary to waive your mortgage contingency
Many buyers in NYC are under the impression that they must automatically waive their mortgage contingency in order to have a chance of beating competing all-cash or non-contingent bidders.
However, not all situations are competitive enough to justify you waiving your mortgage contingency and risking your deposit. If you are receiving an NYC buyer’s broker commission rebate and working with a seasoned buyer’s agent, he or she will be able to glean competitive intel from the listing agent and determine whether it’s in your interest to waive your mortgage contingency.
3. The mansion tax may apply even if your purchase price is below $1 million
The NYC mansion tax is a 1% tax on the purchase price of residential real property valued above $1 million in New York City which is customarily paid by the buyer. If you are buying new construction or offering to cover some of a seller’s closing costs, then the mansion tax may still apply on a purchase price below $1 million.
For example, if you as the buyer agree to pay some or all of the city and state transfer taxes, sponsor legal fees and broker commission on the deal, then these expenses will be added to your purchase price for the purposes of calculating the mansion tax bill. It’s also worth noting that the mansion tax is not applicable to portion of the purchase price associated with any personal property such as furniture, fixtures and art.
4. Dual agency can be risky
You may be enticed by the soothing talk of listing agents who claim that your offer will be more competitive if you stay unrepresented. We already know this is not true because sellers in NYC generally agree to pay the same total commission regardless of whether a buyer’s agent is involved in a deal. However, the real risk of staying unrepresented is that you will be forced into a dual agency arrangement, whereby the same salesperson or broker simultaneously represents both the buyer and seller.
Dual agency in NYC presents you with several risks because you are working with an agent who does not have any loyalty to you. This makes it much more difficult to negotiate effectively, and it increases the risk that the listing agent may withhold information from you because he or she is motivated by the risk of earning double commission on the deal.
5. You should be prepared to move quickly
Many of the most desirable listings in NYC often have an accepted offer after the first open house. In order to have a chance at winning these types of properties, it’s imperative that you have all of your offer documentation prepared in advance.
If you work with a seasoned buyer’s agent, you can work with him or her to review and assemble your offer documentation and come up with a game plan so you are able to mobilize quickly once you commence your search.
DISCLAIMER: This article expresses my own ideas and opinions. Any information I have shared are from sources that I believe to be reliable and accurate. I did not receive any financial compensation in writing this post, nor do I own any shares in any company I’ve mentioned. I encourage any reader to do their own diligent research first before making any investment decisions.
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