Resources

 

What is the difference between a coop and a condo?

What will my closing costs be?

What else should I know before I buy a new home?

We tried to answer these questions below.

 

What is a condo?

A condominium apartment is real property. The buyer receives a deed just as though he/she were buying a house or parcel of land. Since this is real property, there is a separate tax for each apartment. You are responsible for paying your own real estate taxes. In addition, there is a monthly common charge which is similar to the maintenance charges in a cooperative. These common charges are not tax deductible and do not include your Real Estate taxes. They are specifically for the running and maintenance of the condominium complex.

Advantages of condominium ownership

  • Financing is flexible, you can finance up to 90% in some cases.
  • The application process is quite simple. An interview is not required. The likelihood of rejection is minimal.
  • There is greater flexibility in sub-leasing the unit. This makes condominiums the number one choice for investment properties.
  • Monthly combined common charges and Real Estate taxes in a condominium are generally less than a cooperative’s monthly maintenance charges, resulting in higher purchase prices.

Given there are few condominiums and that they are easier to purchase, they are generally more expensive than cooperatives. Additionally, they are less expensive to carry than a cooperative apartment as there is no underlying mortgage for a condominium building.

Approval process
The approval process can take up 10-30 days based on a credit check and individual owners requirements. Expect application fees and move-in fees. Security deposits may exceed one month’s rent.

 

What is a co-op?

Cooperatives are a type of ownership that is more common in New York City than elsewhere in the United States. In New York City, 85% of apartments available for purchase are in cooperative buildings, while 15% are in condominiums. Cooperatives are owned by an apartment corporation. Once you purchase within a cooperative building, you are now known as a shareholder. You purchase shares within the cooperative corporation which entitles you (the shareholder) to a long term “proprietary lease.” Individual shareholders do not actually “own” their apartments. They own a percentage of the total shares within the cooperative. The larger the apartment, the higher percentage of ownership within the cooperative corporation. Cooperative shareholders contribute a monthly maintenance fee to cover the expenses of the building. This fee covers heat, hot water, insurance, staff salaries, mortgage indebtedness, and real estate taxes. Most cooperative corporations have underlying mortgages on the building.

Advantages of co-op ownership

  • All prospective purchasers are interviewed for approval or disapproval by a Board of Directors.
  • The quality of life and security of the building are supported.
  • You know all of your neighbors
  • Portions of the monthly maintenance fees are tax deductible due to the building’s underlying mortgage interest. Shareholders can deduct their portion of the building’s real estate taxes.

Disadvantages inherent in purchasing a co-op

  • There is a minimum down payment set by the Board of Directors. It is usually a minimum of 20-25% in cash.
  • Subleasing can be difficult. Each cooperative has its own rules, and they should be carefully reviewed prior to application for purchase.
  • Shareholders are subject to “special assessments” added to the monthly maintenance. These assessments are usually for unanticipated building improvements.
  • When you decide to sell, the prospective purchasers must be approved by the Board of Directors.

Approval process
The approval process can take 30-45 days. Prospective tenants must submit extensive personal and financial information, and interview with the Co-op board. Expect large application fees and move-in fees ($300-$500). Security deposit may exceed one month’s rent.

 

Closing costs

Closing costs: condominium apartments/townhouses

For The Seller

Own Attorney: $2,000 & up

NYC Real Property Transfer Tax:

  • 1% of purchase price if $500,000 or less of the entire amount
  • 1.425% of purchase price if over $500,000 of the entire amount

NYState Transfer Tax: $4 per $1,000 of purchase price

UCC-3 Filing: $75 & up

Payoff Bank Fees (if applicable): $300 & up

Managing Agent Fee: $500 – $750

Move-Out Deposit: $500 – $1,000 (usually refundable if no damage)

Broker Commission: 6% of purchase price

Gains Tax Withholding (out of state seller): 7.7% of gain

Non-US Resident (FIRPTA): 10% of price withheld or paid

For The Purchaser

Own Attorney: $2,000 & up, consult your attorney

Managing Agent Application Fee: $250 – $500

Credit Report Fee: $50 – $100 per applicant

Mansion Tax: 1% of purchase price when $1 million and over

Move-in Deposit: $500 – $1,000 (usually refundable if no damage)

Title Insurance, Title Search & Recording Fees: not more than 0.5% of purchase price

Building Searches: $200 – $400

Recording Charge: $17 per document plus $5 per page

If Financing, Mortgage Associated Fees:

Origination Costs – points: 0 – 3% value of loan

Application, Credit Check, etc.: $500 & up

Appraisal: $275 & up

Bank Attorney: $500 & up

UCC-1 Filing: $50 & up

Mortgage Recording Tax:

  • up to $500,000 is 1.8% of mortgage
  • over $500,000 is 1.925% of mortgage

If Purchased Directly from Sponsor: (ie: new construction)

NYC Real Property Transfer Tax:

  • 1% of purchase price up to $500,000
  • 1.425% of purchase price over $500,000

NYState Transfer Tax:

  • $4 per $1,000 of purchase price

Costs can change and vary for some transactions. All information is subject to errors, omissions and changes in facts or circumstances. Always consult your attorney before signing a contract.

 

 

Closing costs: co-operative apartments

For The Seller

Own Attorney: $2,000 & up, consult your attorney

Stock Transfer Tax: $.05 per share

NYC Real Property Transfer Tax:

  • 1% of purchase price if $500,000 or less of the entire amount
  • 1.425% of purchase price if over $500,000 of the entire amount

NYState Transfer Tax: $4 per $1,000 of purchase price

Flip Tax (if applicable): determined by cooperative building, usually between 1 to 3% of price

Payoff Bank Fees (if applicable): $450 & up

Managing Agent Fee: $500 – $750

Move-Out Deposit: $500 – $1,000 (usually refundable if no damage)

Broker Commission: 6% of purchase price

Estate Fees: Coop may impose additional fees for estate sales

Lost Stock and Lease Fees: $250 – $750

Gains Tax Withholding (out of state seller): 7.7%

Non-US Resident (FIRPTA): 10% of price withheld or paid

For The Purchaser

Own Attorney: $2,000 & up, consult your attorney

Managing Agent Application Fee: $750

Credit Report Fee: $50 – $100 per applicant

Mansion Tax: 1% of purchase price when $1 million and over

Move-in Deposit: $500 – $1,000 (usually refundable if no damage)

If Financing, Mortgage Associated Fees:

Origination Costs – points: 0 – 3% value of loan

Application, Credit Check, etc.: $500 & up

Appraisal: $275 & up

Bank Attorney: $500 & up

UCC-1 Filing: $50 & up

Recognition Agreement Fee: $200 & up

Lien Search: $250 – $350

Costs can change and vary for some transactions. All information is subject to errors, omissions and changes in facts or circumstances. Always consult your attorney before signing a contract.