Coops vs. Condos

Condo Overview:

When you buy a condo, you buy real property. You receive an ownership deed for your specific unit along with an undivided interest in the common areas. A condo is managed by a Board of Managers, which holds significantly less power than a co-op board. Technically, the board has the right of first refusal to every apartment that’s offered for sale, but this option is rarely exercised.

The biggest barrier to buying a condo is cost. Condos typically cost ~20% more than co-ops on a price per square foot basis, but finding a true comparison is difficult because condos often have larger floorplans and better amenities because they were built more recently. Condos are great for buyers looking to purchase in newer buildings who want to own their unit outright. With unlimited sublet policies, Condos also make great investment properties.

Co-op Overview:

When you purchase a co-op, you purchase shares in the corporation that owns the building instead of buying the real property. You then hold a proprietary lease to occupy the apartment. Co-ops are managed by a Board of Directors, who have the final say in all transactions. Prospective buyers must put together an extensive application and go through an interview with the co-op board.

One benefit of living in a co-op is that the board- resident relationship is that of a landlord-tenant. Under State Law, shareholders have the right to safe and sanitary living and can withhold monthly payments if conditions become unlivable. Co-ops are great for buyers who plan on establishing full-time residency and do not make good investment properties because sublet policies generally require owner occupancy for at least 2 out of every 5 years.

COOPERATIVES (OR CO-OPS)

In New York City, 85% of all apartments available for purchase (and almost 100% of pre-war apartments) are in co-operative buildings. When you buy a co-op, you don’t actually own your apartment. Instead, you own shares of a co-op corporation that owns the building. The larger your apartment, the more shares within the corporation you own. Monthly maintenance fees cover building expenses including heat, hot water, insurance, staff salaries, and real estate taxes

Advantages of Buying a Co-op:

• Co-ops are generally less expensive than comparable condominium apartments.

• Some of your monthly maintenance fees are tax deductible.

• Cooperative ownership offers a more stable community environment. Residents tend to stay for longer periods of time, and few Coops allow extensive subletting, preferring a high owner-occupancy.

Disadvantages of Buying a Co-op:

• All prospective purchasers must be approved by the Co-op’s Board of Directors. The Board approval process is often time-consuming and rigorous - requiring information regarding finances, employment, and personal background.

• Monthly maintenance fees for co-ops are much higher than for condos. This is because the monthly fee includes part of the underlying mortgage for the building.

• Many co-op boards limit the amount of the purchase price that can be financed and require higher down payments than are usually required for condominiums.

• It is harder to sub-lease a co-op. Each co-op building has its own rules, but many limit or forbid subletting.

CONDOMINIUMS (OR CONDOS)

Condominiums are becoming more popular in New York City as new residential buildings are constructed. Unlike co-ops, condo apartments are "real" properties. Buying a condo is much like buying a house. Each individual unit has its own deed and its own tax bill. Condos offer greater flexibility but are often priced higher than comparable co-op apartments.

Advantages of Buying a Condo:

• In most cases, buyers can finance a larger portion of the purchase price (up to 90%) and put less money down.

• With a condominium, you don’t have to deal with board approval.

• Condo apartments can be freely sublet, giving you more flexibility.

• Monthly maintenance fees for condos are much lower than for co-ops.

Disadvantages of Buying a Condo:

• Condos are generally more expensive than comparable co-op apartments.

• Monthly maintenance payments are not tax-deductible.

• There are fewer condos available in the New York City real estate market, which limits your options.

Standard Fund Requirements

The Budget: Location, size, amenities, building type, school locations and nearness to public transportation are crucial to determining what a property will cost. We suggest that buyers review financing options to determine what amount of money they can put toward a deposit and then determine what they can afford for a monthly mortgage payment. Some people may want to see if they pre-qualify for mortgage status in order to know what budget they will be working within.


Type of Property: The next thing to determine would be the type of property you'd like to buy. Would you like an apartment, condominium, coop or commercial property?

Apartment Purchase: For apartment purchases there is no approval process, besides normal financial inquiries. Buyers are entitled to have complete control over any renovations they wish to make. Maintenance costs are the sole responsibility an owner and with this the owner gets total control over maintenance and repairs. Transferring deeds or reselling an apartment do not require approval. The size of a property can vary according to a budget and location of the property.

Condominium Purchase: Condo owners buy the apartment and also own a percentage of the common building areas, i.e. entrance areas, hallways and recreational areas etc. The condominium is considered real property; because of this fact, owner's have the right to do use the property any way he/she sees fit. Owners are subject to pay property taxes which can either be escrowed into a part of a monthly mortgage payment or which are paid annually as an expense. Monthly maintenance fees are generally paid to the building's condominium association.

Coop Purchase : Buying a coop is tricky, but E&G Realty Group LLC's team of qualified agents can help. When purchasing a cooperative apartment the purchaser is really purchasing shares in a cooperation. The shares correspond to the units in which you live. coop fees include a monthly mortgage payment and maintenance fees for the building. Maintenance fees are sometimes high but both mortgage payments and maintenance fees generally result in higher tax deductibles.

Estimated Fees:

Cooperative Apartment:
For Seller: Broker Fees: Are typically 6%. Fees vary according to property size and amount of marketing
Attorney Fees: Approximately $1,500
Managing Agent: $450
Flip Tax: Consult Managing Agent
Stock Transfer Tax: $.05 per share
Move Out Deposit Fee: $1,000
New York City Transfer Tax: 1.00% of price up to $500,000 1.425% of entire price when it exceeds $500,000
New York State Transfer Tax: 0.4% (.004) of price
Payoff Bank Attorney: If seller has mortgage $30
UCC-3 Filing Fee: If seller has mortgage $350
For Purchaser:
Own Attorney Fee: Approximately $1500
Bank Fees/Application/Credit/Appraisal/Bank Attorney/Miscellaneous Fees: $1,600
Short-Term Interest: One month max*
Move-In Deposit: $1000
Managing Agent or Co-op Attorney Fee: $600
Lien Search: $300
Maintenance Adjustments: One month tax
Mansion Tax: 1% of entire price when price exceeds $1,000,000
*Prorated for month of closing

Condominium/Townhouse:
For Seller: Broker Fees: Are typically 6%. Fees vary according to property size and amount of marketing
Attorney Fees: Approximately $1,500
Managing Agent: $450
Move Out Deposit Fee: $1,000
New York City Transfer Tax: 1.00% of price up to $500,000 1.425% of entire price when it exceeds $500,000
New York State Transfer Tax: 0.4% (.004) of price
Miscellaneous Title Company Fees: If seller has mortgage $200
For Purchaser:
Approximately $1,500
Bank Fees: Points 2%
Application/Credit/Appraisal/Bank Attorney/Miscellaneous Fees: $1,600
Short-Term Interest: One month max*
Real Estate Tax: Escrows 2-6 months
Recording Fee: $200
Mortgage Tax: 1.75% of mortgage on loans under $500,000 or 1.875% of entire amount on loans over $500,000
Fee Title Insurance: Approximately $450 per $100,000
Mortgage Title Insurance: Approximately $200 per $100,000
Miscellaneous Title Charges: $300
Managing Agents Fee: $250
Adjustments:

Common charges: One month max*
Real Estate Taxes: 1 to 6 months
Mansion Tax: 1% of entire price when price exceeds $1,000,000

*Prorated for month of closing
*Expect to pay eight months Real Estate Taxes. These taxes are combined between seller as an adjustment and escrow established by lender.
*Note: When purchasing condos from a sponsor, the purchaser will be required to pay New York City and New York State Transfer Taxes; see above for amounts.
*Also, buyers are required to pay sponsor’s attorney’s fee; this fee is approximately $1,000.

Multi-Family Residential/Commercial Property
For Seller:
Broker Fees: Are typically 6%. Fees vary according to property size and amount of marketing
Attorney Fees: Approximately $5,000
New York City Transfer Tax: 1.425% of price up to $500,000 2.625% of entire price when it exceeds $500,000
New York State Transfer Tax: 0.4% (.004) of price
Payoff Bank Attorney: If Seller has mortgage - $350 Miscellaneous $200 Transfer Security Deposit T.S.D.
For Purchaser:
Own Attorney Fee: Approximately $5,000
Bank Fees: Points 2%>
Application/Credit/Appraisal/Bank Attorney/Miscellaneous Fees: $5,000-$10,000
Short-Term Interest: One month max*
Mortgage Tax: 2.75% of entire amount on loans over $500,000
Real Estate Tax: Escrows 2-6 months
Fee Title Insurance: Approximately $450 per $100,000
Mortgage Title Insurance: Approximately $200 per $100,000
Miscellaneous Title Charges: $1,000
Adjustments: Rents* T.B.D. Real Estate Taxes 1-6 months *Prorated for month of closing

General Closing Procedures:

• What is a closing?


A closing is where a buyer gives a seller money in exchange for ownership and title to a particular property. This bargained for exchange, or consideration, transfers ownership and title of the property. The seller also needs to sign over other documents including a deed. The place of closing is normally at the bank attorney’s office. The parties present will be: seller, bank attorney, real estate brokers, seller’s attorney, buyer’s attorney and title closer.
Buyers need to apply for a mortgage as soon as the contract is signed by both parties. The mortgage process takes up to 45 days and can involve several procedures:


• The mortgage broker compiles the buyer's financial information and then presents the loan application
  
• The bank sends an appraiser to assess the property
  
• The underwriters review the loan and issue a commitment letter.
  
  
If buying an apartment, coop, condo or any other property with a board or association, prepare your application package with your E&G Realty Group LLC broker. These packages tend to vary from building to building. Most boards use the same financial requirements as the bank. Keep an extra copy of your mortgage application and any related documentation. Buyers, are required to get personal, professional and financial letters of reference. If renting, get a letter of reference from your current landlord. Ask what information is needed and for copies of sample reference letters. The board package is important, therefore, answer all questions in a clear, concise manner and give an accurate description of your financial qualifications. Before submitting your application package, write a cover letter, organize the presentation and review it with your E&G Realty Group LLC broker.

The board package is submitted after a buyer receives his/her mortgage-loan commitment letter; it is submitted to a building's Managing Agent. The Managing Agent checks the application, evaluates credit and references, and then submits the package to the board. The board then reviews the completed package. Additional information may be requested or if the package is passed, an interview is scheduled. There is either an interview committee that approves new applicants or a board will do it during its monthly meetings. Your E&G Realty Group LLC broker can assist you as to the date, time and any other preparations for your interview.

Closing is scheduled after the board approves an application package and completes the interview process. This generally takes 2 weeks for final approval and can vary depending on the availability of the parties involved; i.e. managing agent, buyer, seller, lawyers and banks.

General Closing Costs Defined:

Additional Fees: Sometimes borrowers are required to pay additional fees. Some of these including Wire Fees, Tax Service, Survey Costs, Flood Certification, Settlement Charges, Messenger Fees, Sub-Escrow Fees, and Transfer Tax. Ask your broker to explain these fees.

Appraisal Fee: Fee charged which estimates whether or not a property is worth enough to support a loan. A qualified appraiser will look over the property and produce a report.

Attorney Fee: Fees paid to attorney representing you in real estate purchase (some closes require you to pay bank attorney fees or with condos, sponsor fees for sponsor attorney maybe required. Fees vary according to type of property and $ value of the property.

Condo Board Application or Co-op flip tax: Fees charged for processing condo applications or coop shares.

Credit Report: generally between $25 - $100 per report.

Document Preparation Fee: fee charged by bank or mortgage company for preparation of paperwork.

Escrow: (Taxes, Insurance) - In this case money figured into a mortgage for certain conditions like taxes and insurance etc. (see real estate terms defined for a more complete definition).

Inspection Fee: fee for inspection of property to make sure it is up to code and livable

Homeowner's Insurance: is required to protect against property damage from hazards; i.e. fires, floods etc.

Mortgage Insurance: Usually loans made from a down payment of less than 20% require mortgage insurance. This protects a lender if a borrower defaults on home loans.

Origination Fee/Points: Depending on the type of a loan and the rate a mortgage seeker chooses, he/she may pay points. 1 point equals 1% of the total loan amount.

Prepaid Interest: This amount pays the interest due from the date of funding to the end of the current month.

Recording/Transfer Fees: This covers the costs of changing the property title in official county records.

Title Insurance and Search: Fees that are charged for a title search and insurance fees. A title search is used to verify that that the seller is the true owner of the property being sold and that the seller has the right to sell it. Title insurance protects a lender in the event of a lien or other problems with the title for the property in question, that was not disclosed at the time of sale.

Time Until Closing: Generally sales take between 3-5 months to close depending on various factors. The most common factors affecting closing include: mortgage & financing, condo/coop board approval and negotiation.

Recommended Amount To Put Down: The amount needed to purchase property varies according on the type, size and location of a property. For example is the property a single or two family dwelling, coop or condo. E&G Realty Group LLC recommends being prepared to pay about 10-20% of total price. Some properties may accept a smaller percentage for qualification. You will also need to set aside additional monies for closing costs.

Contract of Sale: is a legally binding agreement between a purchaser and a seller in which each party gives consideration, (bargains for an exchange) to define the terms of the sale.

NOTE: Sometimes there are other fees which may be charged. This generally occurs when the property is a condo or coop. Our brokers will be happy to discuss these with you.

Typical Questions Answered:

• What do I need to facilitate the buying process so I do not miss out on a great deal?


The New York City real estate market is extremely competitive. The most desirable and affordable properties can go to contract in a matter of days. The most important factors in getting a deal to closing include the following:

Annual Income - Generally you can borrow up to about 2xs gross annual income. Monthly mortgage and maintenance payments should not exceed 1 weeks gross salary. If you have significant liquid assets you may be able to borrow more.

Financial Statements - should be prepared by an accountant. It should lists net worth including assets, liabilities, salary, bonus, etc. E&G Realty Group LLC submits offers with financial validation. The most qualified buyers are usually the ones whose offers are accepted. Having a complete financial statement is very important when there is an apartment or property with multiple bids.

Asset Valuation - A down payment alone does not qualify a buyer for a coop or a condo in Manhattan. Usually, a coop board or condo association wants guarantees for mandatory maintenance fees. They want assurances against unexpected loss of income. Many coops require liquid assets totaling 1 year's worth of maintenance and mortgage payments after closing. Also, some buildings require liquidity up to three years of combined costs. Ask your E&G Realty Group LLC Broker to assist you with specific requirements.


• What is the importance of a credit check and how does it fit into the buying process?


A credit check is generally performed by a mortgage broker and pertains to your credit history. Resolve disputed claims and have them removed immediately from your credit report. Keep all pertinent documentation which illustrates that the issue is resolved. Also, we recommend buyers choose a mortgage broker because mortgage brokers can save time and money. We work with various brokers throughout the New York Area; if you are interested ask your E&G Realty Group LLC broker for more information.


• Question: What does being pre-qualified mean?


Pre-qualified, also called pre-approved, is when a perspective buyer tells a lender income level, debt and credit information, so the lender can provide an estimated loan amount, based on these criteria. Being a pre-qualified buyer will reassure a seller that any offers made are bona fide and that a buyer can actually make the purchase. In fact, most offers submitted by E&G Realty Group LLC are often accompanied by a buyer's pre-qualification letter; this letter notify sellers that financing is an option.

Ask your E&G Realty Group LLC broker to provide you with information about financing, estimated monthly mortgage payments, and any other necessary qualifications. Pre-approval letters make for strong offers because the lender has already pulled a credit report, checked debt/to/income ratio and done an analysis of your finances. Also, it is preferable to be pre-approved so that there will be no surprises when the credit report is received.


• Why select a real estate attorney?


The real estate market in New York City is a very dynamic market. Having a real estate attorney who specializes in the NYC market is very important. First, they know the intricacies of the laws and regulations. Second, they can respond quickly to any problems that arise and can therefore expedite the closing. Ask your E&G Realty Group LLC Broker to assist you in selecting a qualified real estate attorney.


• What is a closing?


A closing is where a buyer gives the seller money in exchange for ownership and title to a particular property. This bargained for exchange, or consideration, transfers ownership of the property. The seller also needs to sign different documents including a deed. The place of closing is normally at the bank attorney’s office. The parties present will be: seller, bank attorney, brokers, seller’s attorney, buyer’s attorney and title closer.


• What are the steps in the application process?


For mortgage applications and for coop or condo boards, buyers need to gather relevant financial documentation. Required documentation includes 2 months of most recent bank statements, brokerage statements and any other assets. In addition to current income verification, boards and banks require a minimum of 2 years of federal income tax returns. Self-employed buyers need to provide at least 3 years of federal tax returns and a letter from an accountant verifying income.


• When do I need to move?


Find a target date for moving. If looking to finance, expect to take about 3 months from purchase to close. Buyers, begin your search 4-6 months before prior to an estimate moving date.


• Question: Where do I want to live?


New York City is a city of diverse neighborhoods, all with their own unique appeal. Before beginning your search, decide what is important. For example, proximity to public transportation or proximity to your job. Are your preferences for a quiet residential neighborhood or a bustling hub of activity and nightlife? Try to be open to different areas as sometimes neighborhoods other than your first choice are more affordable and offer many of the same features. Visit our detailed neighborhood guide for information on all our neighborhoods. Also, ask your E&G Realty Group LLC broker to include any recommended, areas as you may not be aware of them and they may best suit your needs.


• What is the best way to win over sellers?


If you really want to buy a particular property that has a lot of interest, sell the seller on the fact that you are a qualified buyer. It doesn't matter whether you plan to buy a studio or a building, chances are that there is a limited number of properties available in your price range. In a competitive market attractive properties can be in contract before they appear in the classified ads.

Brokers tend to notify serious buyers first. Make sure that you are ready to buy; have all your paperwork in order including financial documentation and pre-qualification for a mortgage. Communicate yours needs, budget, timetable, and neighborhood preferences.

Make yourself available to view properties. By being flexible with viewing properties during the work week, you can avoid weekends shoppers, congested open houses and a lot of the best buildings tend to show properties between 10-3, M-F.


• How do I make the deal happen?


After finding the property you want, immediately make a verbal offer. Consult your E&G Realty Group LLC broker for the best ways to extend an offer to a seller. There are a lot of different reasons, other than money, that influence a seller in choosing the right buyer. If the verbal offer is accepted, have your broker get confirmation of the offer and acceptance in writing. Once the written offer is accepted and signed, your E&G Realty Group LLC broker prepares a transaction summary. This is sent to the seller's and to the buyer's attorneys for review. Using the signed offer and acceptance, the seller's attorney then prepares a contract of sale. After the buyer’s attorney reviews the contract, negotiates terms and evaluates the property's financial statements, the buyer then signs the contract and presents the down-payment check. Generally, down-payments range from 10% - 20% of the contract of sale. This money is often held in the selling attorney's escrow account to be sent to the seller's attorney. The seller then executes the contract.

Note*: Verbal offers are not legally binding. In fact, in the New York City area an offer is legally binding when both the buyer and the seller sign a contract of sale. Sometimes sellers are tempted by higher offers. To avoid problems, be prepared and have your attorney move quickly through reviewing financials and completing the contract.