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step-by-step buyer's guide co-op/condo requirements building terms closing costs |
| *Flip Tax |
$1% - 3%of purchase price
|
| New York City Transfer Tax
|
$1% of gross purchase price if
$500,000 or under
$1,425% of gross purchase price if
over $500,000 |
| New York State Transfer Tax
|
$2 per $500 of purchase price
|
Bank Fees
*points
*application, ,credit & appraisal
*bank attorney
*UCC - 1 filling fee
|
0 to 3%
$400 - $600
$45- - $600
$20
|
| Mansion Tax |
1% of price when price exceeds $1,000,000
|
| New York City Transfer Tax
|
$1% of gross purchase price if
$500,000 or under
$1,425% of gross purchase price if
over $500,000 |
| New York State Transfer Tax
|
$2 per $500 of purchase price
|
| Title Insurance |
Approx. $675 per $100,000
|
| Mansion Tax |
1% of price when price exceeds $1,000,000
|
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Closing Cost
 Thinking of buying? Read on for the
facts.
People thinking about buying an apartment in New York
usually know that there are two kinds available - condominiums and
co-ops - and that the main difference is that the owner of a condominium
owns real estate and the owner of a co-op owns shares in a corporation.
What many of them do not know is that there are other
differences.
Most of the times for people buying first and maybe only thing that
matters is the apartment itself. Space, location, layout, view.
But what they also need to make themselves aware of are the differences
between co-ops and condominiums so they know in advance exactly
what they're getting into.
Form of ownership is not the only difference between
co-ops and condominiums. As a buyers you will notice that the asking
price for two exact same apartments one in a co-op and the other
being a condominium is different. Condominiums are usually more
expensive than co-ops.
One of the reasons for the disparity, is that co-op boards have
more power to block sales than boards of managers in condominium.
Condominium boards usually have a "right of first refusal"
- the right to buy an apartment at price agreed to by seller and
the prospective buyer. On the other hand co-op boards have broad
power to reject potential purchasers, subject to prohibitions against
discrimination. In that affect, some buyers who would rather not
go thru co-op board missions committee and might opt for a condo.
Another reason that some co-op apartments might be less
expensive than equivalent condominium units, is that there is high
financial obligation owning a co-op. This is the unit owner's proportionate
payment on the underlying mortgage demanded on the obligation the
debt owed by the co-op corporation that is secured by the building
itself.
If you buy an apartment in a 10-unit co-op for $100,000, and there
is $100,000 underlying mortgage on the building, the purchaser's
lender would view the total purchase price as $110,000 because they
would take in consideration that borrower's proportionate share
of the underlying mortgage. " But when you buy a condominium there
is no underlying mortgage, so you are only paying price you are
paying for the unit.
In condominiums no underlying mortgage on the building could also
be a disadvantage.
If you have nothing to mortgage, it's harder to borrow
money when you need it. For example if a major repair is to be done
on the building and the condo has no money available, they are going
to have to access the unit owner to raise the money, with assessments
The co-op on the other hand, has other options. For example, if
there is already a mortgage on the building that mortgage can be
refinanced for an amount that includes whatever additional money
is necessary. While the share holders will ultimately have to repay
the money, they can do so over an extended period of time - by paying
higher maintenance charges, rather than having to pay a one time
assessments.
But while the ability to raise income from outside sources
may be a good thing, some co-ops have to be careful not to raise
too much outside income. Under current federal tax law,no more than
20% of a co-ops total income can come from "nonshare-holder" sources.
If that limit is exceeded in any year, the co-op loses its status
as a housing corporation for tax purposes and co-op share holders
lose their income tax deductions for property tax. There is no such
problem in condominiums, because condominium-unit owner owns real
estate rather than shares in a housing corporation and pays his
taxes directly.
Advantage of co-ops over condominiums is when dealing
with unit owners who fail to make common charge or maintenance payments.
If a shareholder stops making payments to the co-op and the lender,
the co-op is first in line to get the money that is owed upon the
sale of the delinquent unit owner's shares. With a condominium,
the lender who holds the mortgage on a particular unit would generally
be first in the line to receive money owed by defaulting borrower.
Any common charges owed to the condominium association, would be
paid only after the mortgage lender has been made whole.
Condominium boards have limited power over subletting
of apartments, it is more likely that such buildings will have higher
number of rental and transient tenants. If you are buying your apartment
for investment and planing on renting it out you are better of with
a condo. On the other hand, most co-ops have strict policies regarding
sublets and such buildings usually have smaller number of renter
in the building.
It is also much easier for a co-op board to deal with
unit owners who violate the rules than it is for a condominium board
of managers.
If a co-op shareholder violated the bylaws or house
rules, the co-op board could terminate the proprietary lease and
start eviction proceedings. And since the shareholder's right to
occupy the apartment is dependent upon compliance with a proprietary
lease, co-ops are generally successful in evicting truly troublesome
tenant-shareholders.
In a condominium, however, the board of managers does
not have the power to evict a unit owner who violates the house
rules, because the condominium does not own the apartment. And while
some people prefer condominiums for just that reason, there are
others who prefer co-ops because the stability they provide.
Some people are attracted to condos because of their
flexible rental policies. But if you're the kind of person looking
for a building occupied by people as their principal residence,
and you don't want to see a new face with a suitcase in the hall
every week, then you would probably want to live in a co-op.
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