A buyer’s broker is one that works for/with a buyer. But the buyer does not need to pay him/her – the commission comes from the seller’s pocket. The seller’s broker has to split the 6% commission with the buyer’s broker. The broker will send you listings of places, and make calls and appointments for you. He/she will also help with the paperwork involved with obtaining board approval, recommending a lawyer and mortgage broker, and move fast.
A seller’s broker works for the seller. He is the guy who holds open houses and shows you around. In my experience, the seller’s broker is very useful in providing information. They do not want to get into legal hassles, so will disclose information about the apartment that needs to be legally disclosed. Since we decided to work without a buyer’s broker, the seller’s brokers (Halstead) were extremely helpful and did our paperwork for us that would normally be done by a buyer’s broker.
How to select a buyer’s broker? Always go with a reputed company – they are more professional than smaller companies. Some reputed companies in NY are Corcoran, Brown Harris Stevens, Halstead, Elliman, and Stribling. It is very important to select one who truly believes that you will find the place that you want. In other words, if the broker thinks that you are unrealistic, he/she is not the right one for you – I speak from experience. Of course if as a customer you are truly unrealistic then it is unlikely that any broker will be able to find a place for you. But if you are just demanding, that is fine. There is a chance that the buyer’s broker will lose patience if you don’t buy a place within a few weeks. Also, the broker may tend to be insistent on your placing a bid if you like a place. It is best to go with a broker that you are comfortable with. It is also best to communicate the timeline.
Do you really need a buyer’s broker? Depends. Do you plan to check listings yourself, or are you too busy to do that? It is best to keep an eye on listings yourself because the buyer’s broker may not find all the listings for you. Our broker did not send us listings for any of the places that I ended up liking and placing a bid for. In fact, he did not even send us a listing for the one where we signed the contract. Since the seller pays the 3% commission for the buyer’s broker, you may as well go for one because it is of no additional cost to you. However, keep in mind that they can get very insistent if you do not buy a place for a few weeks and decide to wait it out.
What to do before placing a bid? The first thing to do is look for a buyer’s broker if you intend to get one. Get one from a reputed company. The next step is to get a lawyer and shop around for a mortgage. The buyer’s broker will have recommendations, but it is best to get recommendations from friends for a lawyer – our friends had a bad experience with the broker’s recommendation. Get a mortgage broker or shop around for a mortgage on your own. I don’t know the pros and cons of using a mortgage broker because we did the research on our own, and decided to go with my husband’s company bank. Get all these lined up so that when you place a bid you can move fast.
What are comparables? While placing a bid, make sure to get comparables from the broker, and your own comparables from Street Easy and/or Trulia. Comparables are sales in the same building with similar square feet, or sales in that exact area with similar square feet. For a 1200 sq ft apartment in Chelsea, you would look for recent sales in that exact location with 1000-1400 sq ft. The exact sq ft is even better. Use that price per square feet to find the market value of the apartment that you want to place a bid on. Take into account factors such as move-in condition, building amenities, etc. Better move-in condition and amenities will come at a premium. Have at least 5-10 places to compare with, and decide on a final price. NEVER place a bid for the asking price unless there is a bidding war or you think that there maybe more people interested in the place. Good places sell within the first two weeks. If the apartment has had one price cut, there is more room for negotiation if it is still in the market for a couple of weeks.
What do you need to place a bid? Download the form for financials from The Real Estate Board of NY. Fill out your assets and liabilities. Take into account car, jewelry, etc. Get a pre-qualified letter from the mortgage broker or bank for a loan if the seller has asked for it. This is NOT a guarantee that you will get a loan, but will give you an idea of the potential for one. Place the bid in writing (Word attachment to your email is fine), and explain the facts behind your pricing – something like “After going over comparables, the price per sq ft of this apartment is $$$, hence the fair market value of this apartment is $$$. We would like to place a bid of $$$”. Mention when you intend to close. All this paperwork should be given to the seller’s broker.
What to do after the bid is placed and accepted? A lot of times the contract does not go through because the bidder cannot get a loan. If the bid is accepted, get an offering plan from the seller’s broker. But before you hand over the offering plan to your lawyer, get a pre-qualified letter from the bank if you have not yet done so. That way you will not get charged by the lawyer if the bid does not go through. Once you get a pre-qualified letter for a loan, give the offering plan to your lawyer. The lawyer will read it to check whether the building financials are good. The building may have certain rules to be followed. Find out details on how many apartments are in the market, whether one sponsor owns a major part of the building and will hence probably have more clout on the board. Find out how the board is selected. Read the financials to see if the building has had problems in the past. Check to see if there maybe future financial contingencies and there may be a need to increase common charges. Finally, see if you can get a building inspection done. I used Accurate Building and they were excellent!! I highly recommend them. I had Matthew Barnett inspect the home, and he was very helpful and gave me very good information. Home inspection will tell you whether the house is in good condition, whether it requires plumbing fixtures or AC cleaning, etc. They charge a lot, but it is worth it especially because you can uncover hidden problems in the apartment that are not obvious. The lawyer will prepare a contract, and so will the seller’s broker. Read it to see that you are comfortable with the terms and conditions. If all goes well, you will have a signed contract!
Once the contract is signed… Apply for a commitment letter from the bank for a loan. Complete the paperwork for board approval. See that you have all the financials for closing. On the closing day, make sure that the apartment is in the same condition when you first saw it. Check the taps to see that there is water, etc. The buyer’s broker should do this for you. Congratulations! You have your new home!
Two informative blogs about real estate that I dig are: Urbandigs and Manhattan Loft Guy.
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