How Much Value Should I Place on Amenities When Looking to Purchase a Home in New York City?

Are you interested in purchasing a home in New York City? Something you will likely consider in your homebuying journey are the amenities in and around the home you are looking to purchase.[1] In order to help buyers narrow down what is most important, StreetEasy conducted a study on what amenities NYC homebuyers were willing to pay a premium for.[2] Some of the amenities that people were most willing to pay for in “[h]omes [s]old [b]elow $2.5 Million” include:

• “In-unit washer/dryer;
• Gym;
• Pool;
• Children’s playroom; and
• Doorman,” among other things.[3]

When analyzing the price of a home that you are interested in purchasing, you may find it useful to factor in how much more you would be willing to pay for such amenities.[4] To learn more about different amenities and how much of a price premium may be associated with them, please visit Michael Kolomatsky’s New York Times article, for which the link is attached here.

 

Notes:

[1] Michael Kolomatsky, Which Amenities Are Worth the Most to New York City Buyers?, The New York Times (Oct. 6, 2022), (“[B]uyers are willing to pay even more to live in apartments and buildings with added amenities . . . .”), https://www.nytimes.com/2022/10/06/realestate/nyc-apartment-amenities-value.html.

[2] Id.

[3] Id.

[4] Id. (discussing how interest in certain amenities led homebuyers to pay a premium for such).

The board approval process is one of the key stages in the purchase/sale of a cooperative, occurring shortly after execution of the contract of sale. The sellers of a cooperative unit generally have some experience with the board approval process, having gone through the process themselves at some point. Buyers may not have a similar experience to draw upon. This article discusses the board approval process in a typical cooperative transaction. It should be emphasized that every cooperative board operates slightly differently. In addition, while there are several standard clauses that deal with the board approval contingency, such a clause is nevertheless subject to negotiation between the parties, and an attorney should be consulted regarding any specific transaction.

Many contracts contain a board approval contingency clause. This renders the contract of sale “subject to” the consent of the Corporation. If the consent is not given, then the contract is terminated and the buyers receive the return of their down payment without penalty. If, on the other hand, consent of the Corporation is granted, the buyers must proceed with the purchase of the property. Buyers typically have a number of hurdles to jump in order to properly comply with the board approval requirements. Buyers must proceed in good faith to promptly

1. Complete the Corporation’s application and provide all reasonable documentation and references requested by the Corporation supporting the application;
2. Pay all applicable fees and charges ordinarily imposed by the Corporation on the applicants;
3. Attend one or more personal interviews as requested by the Corporation.

Buyers may find themselves in breach of the Contract of Sale for failing to comply with such requirements. This can happen where a buyer fails to submit the board application promptly (often the contract requires a completed application to be submitted within a certain specified timeframe, such as within 10 days of receipt of the signed contract of sale, or within 3 days of the receipt of a loan commitment letter or the deadline to obtain a loan commitment letter). While such a timeframe may seem easily attainable, submissions are often delayed during the process of collecting financial information from various sources, whether by the sheer volume of information requested in the application process, securing letters of recommendation, or collection of other documents required by the board. A buyer may also be in breach for failing to provide all the reasonably necessary follow up documents, such as income verification, employment references, or for failing to attend a scheduled board interview. If a broker is involved in the transaction, this is an area where an experienced broker will provide useful guidance and assistance. Buyers are encouraged to contact the broker to discuss the board approval process in further detail.

One note of caution: the board approval contingency clause in many contracts will only be satisfied, and a buyer required to proceed with the purchase, where the Corporation grants unconditional consent to the buyer. Often a Corporation, in an effort to protect its financial interests in what it may deem a potentially risky transaction, will impose a condition on a prospective buyer, such as a requirement that the buyer place the equivalent of several months’ maintenance payments in an escrow account held by the Corporation. Unfortunately, these conditions may only be made explicit to the prospective buyer during the interview process. Buyers are therefore cautioned not to commit to any conditions that may be presented by the Corporation without first discussing the matter with his or her attorney.

 

PLEASE NOTE: The Weidenbaum & Harari, LLP Timeline Series is intended for informational purposes only and is not intended to constitute the dissemination of legal advice. Some of the legal language discussed herein is subject to negotiation between the parties involved and/or interpretation by a court of law. If you are a client of the firm, we encourage you to speak with the attorney handling your specific transaction for further details. If you are currently represented by another attorney, we urge you to speak with your attorney. If you do not yet have an attorney, we may be able to assist you, and welcome your inquiries. Please contact either partner in the real estate group: Barry Weidenbaum, Esq. at bjw@whfirm.com or Jack Harari at jack@whfirm.com for further information.

Sellers and Buyers alike often inquire as to the meaning of the “mortgage contingency clause,” one of the more significant clauses in New York real estate contracts. Simply put, a mortgage contingency clause ensures that if a buyer promptly applies for a loan from a qualified lender, but fails to obtain a firm commitment for financing within the specified time period, then the buyer may elect to cancel the contract and receive the return of the initial down payment. It should be noted that the commitment letter should not be confused with the “pre-approval letter.” A pre-approval letter is typically a nonbinding letter of very little legal weight issued by a bank prior to conducting a more detailed investigation of the borrower and the property.
There is often a great deal of confusion in the New York real estate market as to whether a mortgage contingency clause is “necessary.” The common explanation given is that buyers should request the clause because it affords them added protection if they are applying for financing, while sellers should avoid the clause because it may result in delays caused by the buyer’s loan approval process, or by having to find a new buyer altogether in the event that the buyer in contract cancels under this clause.

Whether a mortgage contingency clause is “necessary” depends on several factors, including:

1. The financial status of the buyer;
2. The appraised value of the unit for sale;
3. In the case of co-ops and condominiums, the financial viability of the co-op or condominium community of which the unit is a part;
4. Overall real estate market conditions (e.g., buyer’s market, seller’s market, lender’s market). For example, a relatively wealthy individual buying a co-op unit that appraises below the contract price and in which the bank’s underwriters are not satisfied with the financial condition of the co-op may be denied a loan, where a person with relatively less wealth buying a condo that appraises exceptionally high in a financially solid building might be approved. And in either case, the overall real estate market conditions may result in a very different reality. For example, in a “seller’s market,” a seller who has prospective buyers banging down the door with offers well above asking price will have little incentive to agree to a mortgage contingency, while in a “buyer’s market,” the same seller might have no other option but to include the contingency or lose a potential buyer.

It should also be noted that there is no “standard” mortgage contingency clause in New York, although there are a number of common clauses circulating through the industry. Some clauses act like protective bubbles that surround the buyer for a time, and then “pop” and disappear altogether once certain conditions are met. Other clauses act more like shields that guard the buyer from certain conditions throughout the entire contract process. It may be possible to find a middle ground that can satisfy the buyer’s need for financial protection, while reassuring the seller that the contingency period will be short. Therefore, we strongly urge prospective buyers and sellers to consult with their attorneys about this clause in particular, and about the overall process of negotiating a deal from the time of offer/acceptance, to signing the contract, to closing!

 

PLEASE NOTE: The Weidenbaum & Harari, LLP Definition Series is intended for informational purposes only and is not intended to constitute the dissemination of legal advice. Some of the legal language discussed herein is subject to negotiation between the parties involved and/or interpretation by a court of law. If you are a client of Weidenbaum & Harari, LLP, we would encourage you to speak with the attorney handling your specific transaction for further details. If you are currently represented by another attorney, we urge you to speak with your attorney. If you do not yet have an attorney, we may be able to assist you, and welcome your inquiries.

The PKF O’Connor Davies article “Updated Fannie Mae and Freddie Mac Guidelines for Co-operative and Condominium Housing” discusses changes to lending practices in the wake of the Surfside, Florida condominium collapse.

Authors Samuel E. Botta and Paul B. Kruger mention that in response to the collapse, lenders are reconsidering their emphasis on structural integrity requirements for both co-ops and condominiums. One example of such regulation includes requiring “documentation received from regulatory and inspection agencies to make repairs due to unsafe conditions.” To see more of the new regulations and the full article, please find the link here.

Freddy Mac has reported that, as of the week ending November 17^th, the interest rate for a 30-year fixed-rate mortgage has dropped from 7.08 percent to 6.61 percent, the largest decrease to occur within a week since 1981. This announcement comes amid predictions that the rate of inflation is beginning to slow, and offers some hope to potential homebuyers who had seen rates sharply during 2022.

Experts warn, however, that the market may likely remain volatile in the near future, with the fed continuing to use high interest rate to combat inflation.

To read more, please see this article from CNN. If you have further questions, don’t hesitate to reach out to a real estate or financial professional.

Just a few of our recent closings. If you are also looking to buy or sell at these property addresses, you might want to give us a call.

Property	Value	Transaction
215 East 79th Street, NY, NY	$1,260,000.00	Coop Purchase
100 West 93rd Street, NY, NY	$1,050,000.00	Condo Sale
5-03 50th Avenue, LIC, NY	$1,995,000.00	Condo Purchase
255 West 23rd Street, NY, NY	$585,000.00	Coop Sale
11 North Moore Street, NY, NY	$4,460,000.00	Condo Purchase
91 Central Park West, NY, NY	$6,500,000.00	Coop Purchase
345 Webster Avenue, BK, NY	$434,500.00	Coop Purchase
30 Orchard Street, NY, NY	$1,030,000.00	Condo Purchase
150 Myrtle Avenue, BK, NY	$1,275,000.00	Condo Purchase
425 East 51st Street, NY, NY	$995,000.00	Coop Sale

Congratulations! You are almost to the finish line of your Co-op purchase. Please take a moment to review the information below so that you may better understand what to expect as we approach your closing day. Some of the specifics described below may change based on the particular circumstances of your transaction. Please let us know if you have any questions or concerns regarding this information so that we may discuss further with you.

1. Closing Statement:

The closing statement has the breakdown of closing expenses/payments, stating how they will be paid and from where. You will generally receive this between 1-3 days prior to closing, however, there are certain circumstances where the receipt of the closing statement may be delayed further. For example, in order for us to tell you how much money to bring to the closing and to whom the check should be made payable, we must receive information from the Seller’s Attorney about the Payee. If there is a Lender involved, we often need to receive information from the Lender’s Counsel as to the precise amount of money that will be available to you (commonly referred to as your “net proceeds,” which is the loan amount minus Lender’s expenses).

• Once received, please review the closing statement and let us know if you have any questions.

• Remember that funds for the closing will need to be NY certified bank checks, so please make sure that all the funds anticipated for the closing are in a NY branch bank account (and not Schwab, Fidelity, or any investment fund/credit union that may limit how much you can withdraw per day). If you are unsure, please reach out to your bank to confirm they can provide certified checks on the day of closing so that there is no issue.

2. Walkthrough:

Please coordinate the walkthrough with your Broker. The standard NY practice is to do the final walkthrough the day before closing (and sometimes even the morning of the closing). Issues discovered during the walkthrough may be troublesome due to limited time for the Seller to correct any issues (assuming the Contract states the Seller is required to repair it). If you spot any walkthrough issues, we would strongly recommend seeing if the super can come and look at them while you are there – sometimes the supers are able to resolve issues or give initial insight and an estimated cost to repair.

• Please take a detailed look at the unit, and ask your Broker any questions that you may have.

• Let your Broker and Attorney know as soon as possible if you spot any issues.

• If there are walkthrough issues that remain unresolved prior to closing, we can discuss your options.

3. At the Closing Table:

We generally advise clients to allot about 2 hours for closing, though some closings can take longer if there are issues for the parties to resolve, bank-related issues, parties running late, etc. At the closing you can expect to see the Transfer Agent (the individual acting on behalf of the Co-op), the Seller’s Attorney, the Seller, the Bank Attorney (where applicable), and an attorney from our office appearing on your behalf. In addition, if the Seller has a mortgage, a representative from that bank will be stopping by the closing to pick up their mortgage payoff check and drop off the original Stock and Lease for the Transfer Agent to cancel once the closing is completed.

Once you get settled in at the table, a series of documents will be exchanged between and among the parties. We will explain to you the documents that you need to sign and their significance in the transaction. If you have any questions, you will have an opportunity to ask us at that time.

• If you are getting a loan, we will have bank documents to sign.

o It is important to sign these documents first because the bank documents will likely need to be sent to the bank’s closing department for funding approval, which can take some time.

• City/State transfer documents, more commonly known as ACRIS.

o These documents let the State/City know who is involved in this transaction and the amount of tax to be paid on the deal by the Seller. Please note: if your purchase price is above one million dollars, you will be required to pay a mansion tax at closing.

• Co-op documents.

o The Transfer Agent will need signatures on documents required by the Co-op, such as tax abatement forms, emergency contact information, and the documents that indicate your ownership in the Corporation (the Stock Certificate and the Proprietary Lease, commonly referred to as the “Stock and Lease”).

Once you have signed everything, any walkthrough issues have been resolved, and your lender has funding approval (if you have a loan), the Transfer Agent will confirm with all parties that they have permission to cancel the Seller’s Stock and Lease and date your own. Feel free to take a picture of your Stock and Lease at this moment if you have a loan, because the bank will leave with the original copies, and you most likely will not see those documents again until you have paid off your mortgage or you sell your apartment. If you do not have a loan, you will be leaving the closing with your original Stock and Lease. Please make sure to keep these documents in a secure spot, such as a safe, or wherever you store your important documents. If you lose the original Stock and Lease, you may be exposed to additional fees from the Co-op, premiums for affirmative insurance, and closing delays when it comes time to sell the apartment. We will provide you with a photocopy of the Stock and Lease so that you have it as your proof of ownership of the shares.

At this point, if the Seller has/had a loan, the Payoff Representative will leave with their checks.

The Transfer Agent will make copies of all documents exchanged for the Seller/Buyer/Bank. If you have a bank loan, make sure you receive copies of all bank documents signed at the closing. Our office typically does not retain these documents subsequent to the closing unless we also represent the Lender.

If the Seller has not handed you the keys already, they will provide the keys to you. Please note that in some closings, the keys are left with the doorman or with the Brokers. We recommend that you seek clarification if you have not received your keys before leaving the closing.

Congratulations, you have made it to the finish line and are now closed! Please keep in mind that you will need to coordinate your move-in with management.

After the closing, we will send you the final closing statement which you can provide to your accountant during tax time.

If you have any questions about the above summary, please let us know – we want to make the process as smooth and seamless as possible for you!

Taking a break from the office, our staff recently visited Yankee Stadium to unwind and catch a game!

Just a few of our recent closings. If you are also looking to buy or sell at these property addresses, you might want to give us a call.

Property	Value	Transaction
18 West 70th Street, NY, NY	$1,350,000.00	Coop Purchase
373 Hoyt Street, BK, NY	$2,574,500.00	House Purchase
17 East 89th Street, NY, NY	$1,385,000.00	Coop Purchase
138 Willoughby Street, BK, NY	$1,330,000.00	Coop Purchase
1776 Broadway, BK, NY	$899,000.00	Condo Purchase
40 East 78th Street, NY, NY	$2,200,000.00	Condo Sale
340 West 86th Street, NY, NY	$1,800,000.00	Condo Purchase
77 Seventh Avenue, NY, NY	$940,000.00	Coop Purchase
147 Prospect Park SW, BK, NY	$875,000.00	Coop Sale
405 West 23rd Street, NY, NY	$550,000.00	Coop Purchase

According to the Federal Reserve Bank of New York, median home price expectations have declined by 1.4 percentage points, now below pre-pandemic levels.

This may be great news for first-time homebuyers, as noted by Fannie Mae. According to their Home Purchase Sentiment Index, decreasing home prices, in combination with the sentiment that mortgage rates will continue to go down over the next 12 months, means that those interested in purchasing their first home should keep an eye on the market for improving buying conditions.

You can find both the Federal Reserve Bank of New York and Fannie Mae articles here for your convenience.