DIFFERENT TYPES OF OWNERSHIP
In New York City, there are four property types:
A cooperative or “co-op” is actually a corporation that owns a multi-unit building; the corporation is governed by a board of directors that is made up of people who live and/or own in the building. When purchasing a unit in a co-op, you are purchasing shares in the corporation, not real estate. In exchange for the shares, you will receive a proprietary lease entitling you to use of the unit. The proprietary lease, by-laws, and house rules are the governing documents for the co- op and outline the rules and policies to which all shareholders must adhere. All shareholders pay a monthly fee called maintenance to cover the building’s shared expenses including utilities, insurance, staff salaries, the co-op’s underlying mortgage payment and real estate taxes. Although a co-op is not technically real estate, many lenders will provide financing to buyers with terms that are comparable to those for a condominium or single-family purchase.
In order to purchase a home in a co-op, you must be approved by the Board of Directors. Prospective buyers submit their qualifications in the form of a “board package.” The board can approve or deny any applicant and is not legally required to disclose the reasons for its decision. Your realtor is an invaluable resource in guiding you through this process.
A condominium or “condo” is an apartment building or other multi-unit complex where the units are individually owned as real property. When purchasing a unit in a condominium, you purchase the physical real estate plus a proportionate share of the building’s common elements. Once purchased, you will receive a deed to the property. As a condo owner you are responsible for payment of monthly common charges for the cost of building operations as well as for real estate taxes.
In New York, most condominiums require buyers to submit a purchase application. The condominium association has the right of first refusal on any sales or rentals within the condominium. This means the association legally can match the terms of your offer and purchase the unit in your stead, though as a practical matter this happens very rarely.
The term ‘condop’ refers to a hybrid apartment building that includes both condominium and cooperative ownership structures wherein the residential portion is treated as a single condominium unit owned through a cooperative- ownership structure, and the commercial portion is one or more separate condominiums. In practice, a ‘condop’ typically refers to a cooperative that operates more like a condo with respect to its policies and procedures. For example, many condops do not require a board interview and have flexible sublet policies; some may employ a right of first refusal in lieu of board approval for sales and rentals. If you are considering a condop, your agent can advise you further on the pros and cons of this property purchase.
In New York City, a townhouse most often refers to a single-family or two-to-four unit attached row house which often dates back to the mid-to-late-nineteenth century. A townhouse is considered real property for which the owner is solely responsible for payment of real estate taxes as well as all repairs and maintenance. There are a number of neighborhoods that are known for their concentration of townhouses including the West Village, Upper East and Upper West Sides, and several historic areas of Brooklyn.
TIPS FOR OBTAINING A MORTGAGE
Since securing a mortgage can be overwhelming, it’s best to:
Start early and be prepared
To obtain the best terms, you will need a strong credit score and extensive paperwork including tax returns and a thorough accounting of your income.
Speak with several banks and mortgage brokers to learn about different loan products and obtain several quotes for terms. Choose the best product and terms for your needs.
For the Purchaser
Managing Agent Fee
Credit Report Fee
Lead Based Paint Disclosure Fee Transfer Fee
Mortgage Associated Fees
Origination Costs – points Application, Credit Check, etc. Appraisal
Mortgage Recording Tax**
$2,500 + up *
$250 - $500
$50 - $100 per applicant
$0 - $50
0.5 - 2% of sale price (may be payable by seller and/or negotiable) $250 - $750 to Management
1% of purchase price where $1 million and over
$500 - $1,000 (usually refundable if no damage)
0 - 3% value of loan $500 + up
$275 + up
$500 + up
$50 + up
Up to $500,000 is 1.8% of mortgage Over $500,000 is 1.925% of mortgage
Closing costs vary depending on whether you are purchasing or selling your home, and also depending on whether the property is a cooperative versus real property (e.g., condominium or single-family home). As closing costs can be significant, it is important to have an understanding of them as you plan for your purchase.
Title Insurance, Title Search & Recording Fees** Approximately 0.5% of purchase price
Building Searches Recording Charge
Real Estate Tax Escrow
If Purchased Directly from Sponsor
NYC Real Property Transfer Tax
NYS Transfer Tax Sponsor’s Attorney Fee
$200 - $400
$17 per document plus $5 per page 2-6 months (verify with bank)
1% of purchase price if $500,000 or less
1.425% of purchase price if over $500,000 of the entire amount 0.4% of purchase price
$2,500 + up *
* Check with bank/mortgage broker for additional fees. New York State Law requires a written letter of engagement if the legal fee will exceed $3,000. Non New York State residents should procure exemption for state transfer tax forms (TP584).
** These costs apply to real property only, not to cooperatives.
These are only estimates. Please confirm closing costs for specific transactions with your attorney and/or mortgage representative. Compass agents are here to ensure your experience is easy, seamless and positive. Enjoy!