What is Gifting in NYC Real Estate?

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What is Gifting in New York City real estate? We will demystify this topic in the following video. My name is Nick at Hauseit, we are the largest For Sale By Owner and Buyer Agent Commission Rebate company based here in New York City, established in 2014. So, let's get started.

Gifting is as simple as it sounds. For example, a parent may give $50k to their son or daughter to help them with a purchase. But gifting gets interesting particularly when it comes to co-op apartments in New York City and that's because each co-op has its own rules and policies regarding gifting. Some co-ops might permit gifting and some might not. Some co-ops might allow gifting but up to a certain amount whereas some co-ops might permit gifting for essentially the full purchase price. So, really the nuance regarding gifting comes down to co-ops and the particular rules that they have for gifting and the size of the gift. A stricter co-op might not allow gifting at all whereas a more flexible co-op might very much encourage gifting.

Gifting is a particularly relevant concept for co-ops largely because co-op buildings have very strict post-closing liquidity requirements for purchasers. What this essentially means is that for your typical co-op in New York City you will as the purchaser need to have around 1-2 years of your combined monthly mortgage payment and maintenance payment in liquid assets after you close. This requirement is considerably more strict than what a lender may require which typically is looking for around 6 months. So, because the requirements for the co-op building are so strict, many purchasers who have great jobs and who are otherwise well qualified to buy real estate might run into an issue with post-closing liquidity. And therefore, gifting is actually a positive for a co-op because it allows qualified people to become even more qualified and to meet these standards for co-op board approval.

So, we actually don't understand why a co-op wouldn't permit gifting seeing as it only strengthens a residents' likelihood of paying the maintenance and being financially solvent once they take ownership. Some co-ops do not like large gifts because they equate it to 'parents buying for children' and some co-ops don't necessarily permit parents buying for children. And that's why when you're buying a co-op you need to think about the size of your gift and whether or not the co-op that allows gifting is okay with your particular size and approach for gifting

As we previously mentioned, if you are receiving a gift and financing, your lender will invariably ask for you to present a signed gift letter. Co-ops will also require similar documentation. So, in essence you could conceivably use a substantially similar gift letter template and present one version to your lender and present the other version to the co-op. If you're particularly organized and prepared as a buyer, your buyer's agent may encourage you to submit a gift letter along with the other documentation in your offer. Doing so will remind the seller that you are well qualified and that they should consider being very flexible in the course of the negotiation. If for example, you do not submit a gift letter, there's a lot of uncertainty that the seller has to digest which may distract from their willingness to go down on price. For example, they might not believe you're receiving a gift and they'll start to ask a few more questions such as where is the money and where are you going to get it.

So, if you want to take it to extreme lengths and you really want to be the best buyer in the room. We actually suggest that you not only submit a gift letter along with your offer but you also have your gifter put the money in your account prior to submitting the offer and you can therefore include documentation showing that the gift funds are in your name and in your account. Doing so will get the seller and the listing agent very little reason to question this particular nuance of your offer and they'll be less likely to count it against you if there's another offer on the table from somebody who might not necessarily be receiving a gift but perhaps who's offered price or other terms are less attractive.

Save 2% When Buying in NYC: https://www.hauseit.com/hauseit-buyer-closing-credit-nyc/
NYC Buyer Closing Cost Calculator: https://www.hauseit.com/closing-cost-calculator-for-buyer-nyc/
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Hauseit LLC, Licensed Real Estate Broker
Tel: (888) 494-8258 | https://www.hauseit.com
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