Looking to buy my first apartment in NYC, not sure about co-ops.

Asked by Mark, New York, NY Thu May 16, 2013

Looking to buy my first apartment in NYC, but all I can seem to find are co-ops. What are the drawbacks for a co-op? I plan to resell multiple years (5-10) down the road and move closer downtown, would a co-op have any value? Should I stick to renting until then. Any basic information about the co-op process would be welcomed!

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Elena Ravich,…, Agent, New York City, NY
Sun May 19, 2013
It is not surprising that you are mostly finding coops - 80% of all Manhattan buildings are coops. Their main advantage is that they are 35-40% less expensive than condominiums. However, this comes with certain limitations that may not work for everybody. Coops require full financial disclosure, extensive board package, interview and a board approval of every purchaser. Coops also look for post-closing liquidity, in general of 2 years of maintenance plus mortgage and no more than 30% of all debts plus maintenance to income. The main drawback for investors is limitations on renting out apartments, which are set up in each individual coop's rules and regulations and have to be investigated prior to making a purchase decision.

I would be glad to provide more info and to assist.
1 vote
Michelle Wei…, Agent, New York, NY
Thu May 16, 2013
Hi Mark,
There are some good answers here regarding the difference between a coop & a condo, but the main question you have about renting and investment should be the real consideration. There are useful rent/vs/buy calculators online that you can crunch the numbers with and really see what is best for you. We are currently in an 'up-market' - I tell my friends, clients & family that in the cycle of Real Estate - if you think of it as a clock - 2006/7 was noon - the 'top of the market' and 2011/12 was 6:30 the bottom, we are still recovering from one of the most serious market crashes in history. Now the 'clock' is at about 8:00 with multiple offer/ bidding wars as the norm in NYC, so jump in and buy if you are able to, with a strong agent to help you get that apartment! Five years from now when you are ready for your next move you will be very happy you did. Interest rates are creeping up but they are still historically low, so it really is a wonderful opportunity to be a homeowner - even if in NYC we do that overwhelmingly by being coop shareholders.
Good luck and when you are ready to buy, I will be happy to walk you step-by-step through the process.
Michelle Weissman
Senior Associate Salesperson
The Corcoran Group
d: 212.360.2462
f: 212.415.6369
m: 917.293.3427
1226 Madison Avenue, New York NY, 10128
Member of The Real Estate Board of New York
1 vote
Anna M Brocco, Agent, Williston Park, NY
Thu May 16, 2013
Co-op ownership represents an interest (i.e. stock) in realty; each building is different, and so are the rules. Some drawbacks are--co-op boards can be stringent in terms of acceptance policies for potential buyers; since you don't own the unit, board approval is necessary for most renovations; board's financial requirements must be met; not all allow the unit to be rented, etc.
1 vote
John Peitler, Agent, NY,
Tue May 28, 2013
Please contact me for assistance. My name is Tanuja and I can be reached at 347-882-0353. Thank you and good luck.
0 votes
Michele Port…, Agent, New York, NY
Mon May 20, 2013
You should first understand that the process of purchasing a co op or condo in Manhattan is a totally different process than purchasing anywhere else. It is so important to have a broker who can walk you through the process and let you know what to expect each step along the way..
The key is finding a broker you can trust and feel you have a good rapport with. While it is true that Manhattan has mostly co ops, each build has different requirements. In today's market many condos require full financial disclosure and board packages very much like the co ops require.
This is the first time in recent history that it is more advantageous to purchase than rent in Manhattan. Rents are rising. It is totally a landlords market. There is very little inventory for both sales and rentals. With mortgage rates still low and prices to purchase still at reasonable rates, it is often more cost effective to purchase than rent in NYC.
Please call or email me. I would love to refer you to some of my past clients who purchased in this market because it was more cost effective to own.
Michele Portnof
Licensed Real Estate Broker
Charles Rutenberg Realty
0 votes
Brad Malow, Agent, New York, NY
Thu May 16, 2013
Check out http://www.BuyingNYC.com. Super informative about co-op purchases and aimed at helping first time buyers with questions like yours. The blog (with articles by agents, attorneys, mortgage brokers, etc...) has so many answers about the purchase process in NYC.
0 votes
Christopher…, Agent, Tarrytown, NY
Thu May 16, 2013
Here is a blog post I wrote on the coop process...

I have been receiving a lot of questions about Coop Apartments, what they are and how the operate. A Coop is a corporation made up of all the occupants of the building. When You buy a Coop you are not buying an actual unit, you are buying shares in a corporation. You will receive a stock certificate and a proprietary lease which entitles you to occupy the unit.

Since the occupants do not own the unit they do not pay property taxes like you would in a condo or house. You pay a monthly maintenance fee which includes your pro-rata share of the buildings property taxes, and care for the grounds, etc. If in NY you will qualify for the basic STAR reduction but will have to inquire with your particular Coop to see how they handle it. There are additional fees that vary from parking, assessments, flip tax, storage, etc. Again each building is different and you will have to inquire about any additional fees. There is a percentage of your maintenance that is tax deductible, usually 45%-55%, but it can vary. There is always a minimum down payment requirement which can range from 10%-50% down, depending on the Coop. Nowadays, a lot of Coops are requiring 20% down to protect themselves and make sure only the qualified apply. Even the banks are requiring this so times have changed a bit. On occasion you will find a "Sponsor Unit" available. This is a unit that is on the market by the sponsor for the first time. These are highly sought after because they usually don't require a board interview. This is good for the first time only, the next time it goes on the market a board interview will be required. Keep in mind just because at first you don't need an interview the board usually still looks at the package.

When purchasing a coop part of the process is a board interview. Many people get scared and worry about what it will be like. Once you have an accepted offer on a unit you will receive a board package to fill out. This includes a standard application, request for financial information (bank statements, W-2s from previous and current years, pay stubs, etc.) Here are a few major things the board will look at...1) Amount of down payment, where it came from, and how much you have in reserve after making it. Most Coops want to see a few months reserves at least. 2) Credit scores, do you have any judgments against you, how much debt you have. They look at your "Front End Ratio" which is how much debt you'll have with just housing payments and "Back End Ratio" housing debt along with any other existing debt you have; credit cards, loans, etc (student loans sometimes get deferred, you'll have to inquire). They will have a debt-to-income ratio requirement which can vary. 3) Current Income is important as well, they want to see that you make enough and aren't spending everything you have to pay your bills. Having a lot of cash in the bank doesn't impress them, that can be spent quickly. You will also get a copy of the by-laws (house rules) and the offering plan. The offering plan tells how many units are in the building, what the existing mortgage is on the building, how much the building has in reserves, etc. You will have a chance to review these with your attorney to make sure you are buying into a financially sound building.

The application can be a bit intrusive but the Coop does this to make sure that they don't take on any financial liabilities to the building. They will only hurt the corporation. Once the package is complete it can be submitted for the management review and once they approve it, it's then passed on to the board members. Once the board reviews you will be contacted to come in for an informal interview. They might ask questions regarding your motivation for buying in the building, questions about your finances, or just general questions to get to know you further. They will have a pretty good sense of who you are by your package already.

My advice to you...stay calm, don't over answer their questions, be positive! At times you will find out right away if you are approved and others you will be notified the next day, or so by the management company. The approval needs to be in writing and sent to the attorneys on the deal to make it official. Once approved you can finalize everything with the bank and setup a closing. I hope this answers some of your questions and I welcome any further inquiries.
0 votes
Javier Menes…, Mortgage Broker Or Lender, Melville, NY
Thu May 16, 2013
Most of the real estate in Manhattan happens to be co-ops or condos. At this time, as mentioned below, there is a shortage of condo inventory, which is why you see mostly co-ops available.

Purchasing a co-op is actually a purchase of shares of the corporation that owns the co-op. These shares come with a lifetime lease to a unit, which is the apartment you're shopping. So no, you're not really buying property. Co-ops have the right to demand a minimum down payment for those buyers who are financing, regardless of the lender. Part of the process also involves you meeting with the co-op board for approval. This is usually based on your financial situation, credit, among other things, depending on the co-op. They do have the right to reject you for whatever reason as well. With condos, you have none of this, you do meet with a board, but the worst they can generally do is demand advance payments of the homeowner dues.

I suggest you meet face-to-face with a Loan Officer and get your finances in order. Ask all the questions you want and make sure you thoroughly understand the process with both a co-op and condos. I'm always available to meet in our Manhattan offices if you need an experienced Loan Officer. Good luck!

If my response was helpful, consider clicking BEST ANSWER!

Javier Meneses
Senior Loan Officer
NMLS #23130
310 Crossways Park Drive
Woodbury, NY 11797
(516) 606-9648 Cell
(631) 659-2011 Office
(516) 918-5383 Fax
0 votes
Ross Ellis, Agent, New York, NY
Thu May 16, 2013
Hi Mark,

Currently there is very little inventory in Manhattan, thus the reason you are finding mostly coops. The drawback with a coop is that you don't own the apartment, you own shares in the corporation. Coop boards are stricter about financials, etc. Should you wish to rent the apartment you may or may not be able to. Some coops permit you to rent for a year or two only after you have lived there for at least two years. Subletting policies are very strict in a coop.

In a condo you have much more flexibility. That said, there are some condos on the market.

As a first itme home buyer in NYC, and with the invnetory so low, I would recommend working with a buyer's broker.

If you would like to call me, I would be delighted to speak with you at length to determine what would be the best option for you. Then you can make an informed decision as to how you want to proceed.


Ross Ellis
Licensed Real Estate Salesperson
Member of Real Estate Board of New York
212.317.7828 direct
770 Lexington Avenue, 10th Floor New York, NY 10065
0 votes
Gabriella Or…, Agent, New York, NY
Thu May 16, 2013
Hi Mark,

To answer your question, I suggest to discuss your financial situation first. If you have 20% down, at least 2 years of monthly maintenance to show in your savings account and moving costs, then the positive assumption of real estate is that the value goes up after 5-10 years. I believe you are looking for $500,000 and less in value. Co-op means you own a shares not a real property and depending on the board, if you would rent out your purchased coop unit, the potential tenant would need to be approved by the board first. All the information is transparent and board members have a right to deny an applicants at their own terms. I suggest to speak to a mortgage professional first.

If you have any questions, feel free to reach out to me.

Best Regards,

Gabriella Oros
City Connections Realty
0 votes
Teya Beradze, Agent, New York, NY
Thu May 16, 2013
Co-ops as well as any other property only will increase in value over time.
Feel free to contact me if you have any questions or to schedule to see apartments.

Teya 917-410-1388
0 votes
Russell Ding…, , New York, NY
Thu May 16, 2013
the only drawbacks are the coop boards you face, unfortunately as of yet , there are no regulation boards that oversee coops, so they run like they are their own government, so even if you find a buyer, that meets all qualifications , there is still a possibility that you can get denied by the board, but any property can increase in value over time, if you have any further questions, you can contact me directly
0 votes
Keith Jean-P…, Agent, East Brunswick, NJ
Thu May 16, 2013
This is the best information available for co-ops:

0 votes
Charlie Summ…, Agent, New York, NY
Thu May 16, 2013
Dear Mark, co-ops are absolutely fine investments if you are looking for a hone for yourself and not looking to rent out the unit. Due to the nature of cooperative ownership, many co-ops discourage renting out the units and also investigate prospective purchasers' financial backgrounds thoroughly. This is actually to your benefit in most cases- the healthier the financial position of the shareholders (in other words, the unit owners), the better off everyone in the co-op is. Your time horizon sounds perfectly suitable for buying a home, 5-10 years will make it worthwhile to engage in the purchase process (which will likely take a couple months and maybe somewhat longer) rather than just keep renting. The process itself is all about paperwork so it can be frustrating at times but again well worth it to get a home you will be happy with for years and not need to keep paying rent! If you have more specific questions please let me know. Charlie Summers, csummers@bellmarc.com
0 votes
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