WHAT IS A COOP?
In this form of home ownership, one owns shares of stock in a corporation that owns the building. These shares are considered “personal property” similar to any other shares of stock. The corporation issues each shareholder a “proprietary lease” which gives the shareholder the right to occupy his.
WHAT IS A CONDO?
In this form of home ownership, one owns real property much like owning a house. The condominium residents elect a board of managers who are responsible for overseeing the operations of the building and enforcing the “house rules” of the building. The main difference between owning a condominium and a house is, in addition to owning the unit, you also own a small percentage of the “common elements” of the building such as the halls, stairwells, basement, etc. Each owner pays a common charge to the condominium association to pay for such items as: payroll, building maintenance and supplies, management fees and building repairs. In addition, some condominiums maintain a reserve fund in order to pay for major repairs and improvements to the building.
WHAT IS A COND-OP?
By definition, a cond-op is a residential cooperative where the ground floor (typically commercial units) is converted into a separate condominium which is either owned by an outside investor or the original sponsor of the building. Although the residential units are a cooperative, the commercial units are owned as a condominium by an entity other than the cooperative. Thus, the cooperative does not receive the benefit of the income from these units. Many times, people will refer to cooperatives that operate under condominium rules as “cond-ops”. This is not accurate although you will hear this quite often. A cooperative that operates under condominium rules is just that.
WHAT IS A TOWNHOUSE/BROWNSTONE?
This form of ownership provides the owner with a fee simple ownership of real property. The owner is responsible for payment of all real estate taxes, maintenance and repairs of the property. The sale of the property may be conveyed to any party without prior approval by anyone other than the homeowner. Townhouses may be single family or multiple family based on zoning.
WHAT DO I NEED TO PREPARE BEFORE LOOKING FOR AN APT TO BUY
Review your credit report:
Remove all disputed claims and clear up any debt if possible, especially outstanding credit card balances.
Prepare financial documentation:
A detailed financial statement of net worth with supporting documentation, employment verification, credit history, and tax returns, among other items, will be required by most financial institutions as well as the board of directors for a cooperative. Having these documents prepared will save you time during the purchase process.
Get a mortgage pre-approval:
Speak with a mortgage lender or broker and obtain a written pre-approval for your mortgage, which will help you determine your purchasing power. This knowledge will enable you to act expeditiously and with confidence when you identify the property you would like to purchase. Additionally, a pre-approval assures the seller that you are qualified, providing you with an advantage during the bidding process. During your conversations with a mortgage lender or broker, an important issue to discuss is your debt-to-income ratio. As a general rule of thumb, your total annual housing costs should not exceed 25-30% of your gross reported income, and your total debt should not exceed 35-40%. Another important consideration is deciding what percentage you will finance and what the down payment will be. Condominiums will typically require a minimum of 10% down and allow for 90% financing whereas cooperatives vary building to building with a minimum of 20% up to 50% down or in some cases all cash with no financing allowed.
Choose a Manhattan-based real estate attorney:
As New York City has complex real estate laws, attorneys are utilized to close all real estate transactions. Time is often critical; be sure your attorney is available to move quickly.
HOW DO I INITIATE THE PURCHASE PROCESS ONCE I FIND MY APT?
Submit a written offer:
Once you have found the home you wish to purchase, submit a written offer through your agent. The offer will include such provisions as purchase price, down payment, amount of financing, included and/or excluded personal property (i.e. window treatments, lighting fixtures, etc.), preferred closing date, current income (combined for couples), job description, net worth and debt status (loans, credit, etc.). Once your offer is accepted by the seller, the seller's attorney will draw up a contract and send to your attorney. Keep in mind that sellers are allowed to hear all subsequent offers while your contract is negotiated and/or finalized. In fact, a seller may accept another purchaser's offer up to the point of a fully signed, executed and returned contract. This means that until your contract is signed by both you and the seller, your deal may not be upheld as the primary deal. Therefore, instruct your attorney to proceed expeditiously.
Review the contract with your attorney:
Upon completion of the contract, your attorney will review its contents with you, perform a due diligence review of financials and/or issues pertaining to the building, ask you to execute the contract and put forward a 10% deposit to be held in escrow until closing. Thereafter, the seller signs the contract and your attorney will deliver one original to you and one to your mortgage lender/broker.
Apply for a mortgage (if applicable):
Your agent will work with your mortgage lender to coordinate the appraisal of the property and provide the lender with requested information on the building. The loan process typically involves several steps from application to appraisal and finally approval. This process may take up to forty-five days to complete and hinges on your ability to provide all of the required financial data to your lender in a timely manner.
Complete board package (usually for coops):
While awaiting your mortgage commitment, work with your agent to complete your cooperative board package. Your agent will provide an application that varies from building to building. Typically the application must be completed and returned to your agent (who will in turn deliver it to the appropriate party) within ten days of receipt of the fully executed contract or three days from the date a bank commitment letter is received, whichever applies. A typical cooperative board package requires at the minimum the following: personal and business reference letters, employment verification letters and/or pay stubs, bank verification and brokerage statements, net worth statement (this mirrors the information requested by your bank), two-years of tax returns and the mortgage loan application and commitment. Once completed, your agent will review the package in order to assure that all the required documentation has been supplied and presented in the manner requested by the board and then forward the package to the buildings managing agent or authorized personnel for processing.
Upon review of your board package, the board will typically schedule an interview to meet with you. After the interview, notification of the board's decision is given to you or your agent within seventy-two hours. However, some boards reserve the right to take longer.
Upon board approval, notify your attorney who in turn will coordinate the closing date. A typical closing can take up to two weeks to schedule, so keep this in mind when planning your move.
Inspect the property:
The day before or the morning of the closing (usually after the seller has vacated), your agent will accompany you on an appointment to inspect the property. The purpose of this inspection is to make sure the property is in the condition as stated in the contract.
Attend the closing:
When attending the closing be sure to bring your driver's license or passport, your checkbook for any last minute adjustments, and any certified checks that may be required.
The closing for a cooperative is ordinarily held at the office of the management company for the building. The closing is attended by you, your attorney, the seller, the seller's attorney, the lender's attorney, a representative from the management’s transfer department and the agent(s) involved in the transaction. At the closing you will first sign documents necessary to complete the loan transaction inclusive of a Security Agreement, Promissory Note, Stock Power, and an Assignment of Lease. Thereafter, you will sign all documents to convey the apartment and secure interest in the apartment such as Stock Certificate, Proprietary Lease and Consent. Checks representing the balance of the purchase price and adjustments are exchanged for the keys to the apartment.
The closing for a condominium or townhouses is ordinarily held at the office of the seller’s or lender's attorney. The closing is attended by you, your attorney, the seller, the seller's attorney, the lender's attorney, the title company closer and the agent(s) involved in the transaction. At the closing you will first sign all documents necessary to complete the loan transaction inclusive of a Mortgage and Promissory Note. Thereafter, you will sign all documents to convey the condominium apartment to you including a Deed, Title Report, and Unit Power of Attorney. Checks representing the balance of the purchase price and adjustments are exchanged for the keys to the apartment or house.
As part of the closing you will be given a Closing Statement. It is important to understand the costs that will be detailed on the Closing Statement. Here is a guide designed to give you the general costs associated with the purchase or sale of a cooperative, condominium or townhouse property. Please note that these are estimates and that potential buyers and sellers should consult their real estate attorney or financial advisor for specifics.