CLOSING COSTS: COOP vs CONDO

COOP
Coop closing costs are generally around $3,000. If you’re buying a coop for more than $1 Million, you will need to add an additional 1% of the sale price to the closing cost total to account for the NY State Mansion Tax.

CONDO
In addition to the standard miscellaneous bank closing costs, buyers are required to pay the NYS Mortgage Tax and Title Insurance premiums for condo purchases. A very rough way of calculating condo closing costs is to take approximately 2.5% to 3% of the sale price (it would be less if the you’re putting down more than 25%). In the case of a new construction or new conversion condo, and additional 1.5% to 3% should be added to that amount for the sponsor fees (i.e. transfer taxes, sponsor’s attorney fees, etc.) unless you can negotiate out of paying those items. If the property you are buying is more than $1 Million, then there is an additional 1% of the purchase price to add for NYS Mansion Tax.

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The reason why co-ops closing costs are so much lower thank condo closing costs is that, since you are buying shares in a corporation rather than real property, you are not required to pay for the NY State Mortgage Tax or Title Insurance. These are two major costs that you must pay for when you purchase a condo.

Rent Control vs rent Stabilization

I get this question a lot: what the difference between rent control and rent stabilization? So here you go:

Rent Control
The rent control program generally applies to residential buildings constructed before February 1947 in municipalities that have not declared an end to the postwar rental housing emergency. A total of 51 municipalities have rent control, including New York City, Albany, Buffalo and various cities, towns, and villages in Albany, Erie, Nassau, Rensselaer, Schenectady and Westchester counties.
For an apartment to be under rent control, the tenant (or their lawful successor such as a family member, spouse, or adult lifetime partner) must have been living in that apartment continuously since before July 1, 1971. When a rent controlled apartment becomes vacant, it either becomes rent stabilized, or, if it is in a building with fewer than six units, it is generally removed from regulation. For more information on succession and the definition of family member, check out the fact sheet.
An apartment in a one- or two-family house must have a tenant in continuous occupancy since April 1, 1953 in order to be subject to rent control. Once it is vacated after that date, it is no longer subject to regulation. Previously controlled apartments may have been decontrolled on various other grounds. On rare occasion, a decontrolled apartment is ordered back under rent control as a penalty for certain violations of the rent laws.

Rent Stabilization
In NYC, rent stabilized apartments are those apartments in buildings of six or more units built between February 1, 1947 and January 1, 1974. Tenants in buildings of six or more units built before February 1, 1947, who moved in after June 30, 1971 are also covered by rent stabilization laws.
A third category of rent stabilized apartments covers buildings with three or more apartments constructed or extensively renovated since 1974 with special tax benefits. Generally, these buildings are stabilized only while the tax benefits continue.

I know, today’s post is a bit technical (i.e. boring!) but it’s informative, right?

LAND LEASE: PROS & CONS

Whenever you are considering buying a condo or co-op apartment located in a leased land (i.e. Land Lease), you shall consider the building individually and carefully study, with the help of an expert attorney, its offering plan and building minutes.

Land Leases generally last anywhere between 50 and 99 years. The building belongs to an association, while the land belongs to someone else or another entity. Currently, there are about 75 land lease buildings in Manhattan, mostly in Battery Park and about 25 land lease buildings in Brooklyn.

CONS
– the closer the building is to the expiration of the land lease, the more difficult it is to refinance the underling mortgage on the land (if it is a co-op)
– it can also be difficult for the unit owners to refinance their mortgages if the lease is about to expire
– maintenance/common charges can be up to 20-30% higher than in a comparable building not on a land lease
– there may be periodic increases in the land lease related to the re-appraisal of the land value which can lead to significant maintenance/common charges increases
– maintenance/common charges aren’t tax deductible
– land lease buildings’ value are generally more affected with the market is down and in buyers’ markets

PROS
– land lease apartments are less expensive (15-20% less) than comparable apartments not on leased land
– for every additional $100 in maintenance/common charges the value of the apartment shall decrease by $20,000
– land lease properties are a good options for buyers who are short of cash and have a good income
– should the building be able to buy the land it is situated on, the property value will immediately sky rock

So what should you keep an eye on?
1) how long is the lease for?
2) has the building the right to extend or renew the lease on the land?
3) have there been any rent increases in the last few years and are there any planned for the upcoming years?
4) how much is the security deposit? (this is generally required in form of cash and can not be financed)
5) review the offering plan and building minutes carefully
6) for co-ops: if the underline mortgage is about to expire can the building re-finance?

pied-à-terre

A pied-à-terre is a (generally small) apartment that is used as a second home or for temporary lodging in a big city.

Literally a foot on the ground, this French term lends itself to the transient nature of the unit in question. The affluent, or busy traveler may have several pied-à-terres in the major world’s cities to avoid staying in hotels long-term, and enjoy some of the comforts and privacy they are used to.

If your goal is to be a part-time New Yorker, a pied-à-terre is exactly what you need: an apartment where you can come and go, a secondary residence with your primary residence somewhere else.

If you are planning to buy a pied-à-terre the first thing that you have to verify is whether the building you are buing into allows for them. Co-ops are generally stricter from this point of view, so always check with your agent before making an offer. The ratio behind this is that co-ops want shareholders in their building to have their NY apartment as their primary residence. Condos are far more flexibile, but have been getting more stricter in the last few years.

penthouse

A penthouse is a luxury apartment situated on one (or more) of the highest floors of an apartment building.

Historically, penthouses were used to house mechanics such as the controls for the elevator system, heating and cooling systems, and were not considered desirable for real estate.

Penthouses became the most exclusive apartments in town during the 1920s, when the idea of creating a luxury home on the top floor of an apartment building became the best way to show power and wealth.

Nowadays the rule is “the higher, the better”. Penthouse is a synonym for more light, more space, larger layouts, better finishings, often higher ceilings, and obviously outdoor spaces. Which is why penthouses in Manhattan and around the world are some of the most expensive and exclusive real estate properties.

50 Gramercy Park North is a wonderful example of the quintessential penthouse apartment:

50 Gramercy Park North, PH – Living room + Dining

50 Gramercy Park North, PH – Living Room

50 Gramercy Park North, PH – Terrace

A penthouse is a luxury apartment situated on one (or more) of the highest floors of an apartment building.

CO-OPS

As a real estate agent, I get this question a lot: ‘what’s a co-op, exactly?’ Especially when I deal with international investors, who have no idea of the existance of such an ownership structure in real estate, it is essencial for me to explain what co-ops are and how they work. And why they -the international investors- should stay away from them. But that’s another story.

Let me share my knowledge with you.

Co-ops (short for cooperatives) are apartment buildings owned by a corporation. Individual tenants do not own their apartments, instead they own a share of stock in the corporation who formed the building. Every owner is assigned a share of stock based on the size and floor level of their apartment. Ownership is established by a stock certificate and occupancy is governed by a proprietary lease.

Coops are currently the most popular form of property ownership in Manhattan, where 85% of all apartments are co-ops. Also, nearly 100% of Manhattan’s pre-war buildings are co-ops.

The first co-op buildings appeared in Manhattan in the late 1800’s; they where called “house-clubs” back then. 

During the years co-ops have been “in” and “out” the preference of New Yorkers. In the 70′, when ownership had become more desirable and there were city and state advantages to converting into a co-op, many buildings did so giving their tenants a great advantage: instead of writing off the interest expense on the unit owned, one could also write off the interest on the underlying mortgage of the building.

Nowadays co-ops are a bastion of exclusivity, with boards having the right to reject any borrower who they think does not qualify.

What about you? Do you live in a co-op or a condo? What’s your experience?

alcove studio

An alcove studio is a studio apartment with an additional space off the living room that can be used as a saparate dining or sleeping area.

Alcove studios often are L-shaped, which allows for a more definite separation of the spaces within the apartment.

If the alcove is big enough, has a window, and space for a closet, it can be converted into a true bedroom. Such alcove studios are sometimes referred to as Junior One Bedroom apartments.

If the space isn’t generous enough to create a real bedroom, an archway or a room divider such as library can separate the spaces.

In the picture above, the alcove is located right behind the living space and is used as a sleeping area.

Alcove studios are a great option for the ones looking for a studio where every little space has a purpose.

parlor floor

Parlor Floor

The parlor floor, traditionally the grandest floor in a townhouse, is situated on the second floor, and is directly accessible from the building’s front steps.

With the highest ceilings in a townhouse and easy access from the entrance, parlor floors have been used for entertaining with two rooms (living rooms, libraries or formal dining rooms) separated by a staircase.

Many parlor floors have been divided into two separate apartments, or have been conbined into a one big living space.

In this photo, the staircase in the parlor floor used to be between the office and the living room.

maisonette

A maisonette is -literally- a little house, a large multi-storey apartment located in an apartment building.

A maisonette in New York City, has the power to make people go back in time. One of my favorite ones is located at 1 East End Avenue, Maisonette A. With 6 bedrooms, abundant light, a wood-burning fire place, and a wood-paneled library, one sure feels like living in a French home from the 1800s.

The usual layout for a maisonette is a combined kitchen and dining room, living space and accessories on the lower floor, several bedrooms and a second bathroom on the top.

Maisonettes can be fund all over Manhattan, especially in the Upper East Side.