Buying an Apartment
In a condominium, a purchaser owns the apartment plus a percentage of the common areas of the building. The purchaser takes title by deed, which is recorded in the county clerk’s office. If you intend to obtain a loan to purchase the apartment, you will sign a mortgage, which will be recorded in the county clerk’s office. In a condominium there is an association that you belong to once you purchase the apartment. The association provides services such as general maintenance to the common areas in exchange for a monthly fee. Because it is real property you will pay your property taxes separately or inclusive with your mortgage payments.
In the case of condominiums it is common to finance as much as 90% of the total cost of the property. However, in this changing market, some banks are now only lending 80% of the total cost of the property.
- Easier approval process
- Own actual real estate giving you more rights to it, i.e. you can transfer deed to family members, sublet or re-sell easier, etc.
- More control over building maintenance and development issues
- Lower monthly common charges
- Typically higher purchasing price on per sq. ft. basis
- More legal responsibilities for the entire living facility
A co-op is a corporation composed of the tenant shareholders of the building. Each tenant shareholder owns a number of shares in the corporation associated with his or her apartment rather than owning the apartment itself and holds a proprietary lease to their apartment. The monthly maintenance charges would include common charges, real estate taxes and interest on the underlying mortgage (if any). In a co-op, the building and its tenants are subject to rules and regulations set forth in the by-laws of the corporation. If an owner would like to sublease his apartment or perform any alterations or renovations to it, he must get permission from the Board of Directors elected by the tenants in the building.
In terms of financial requirements, most co-ops require a 20% down payment but can require more depending on the building. Additionally, you will need to submit a board application that includes your financial information and be interviewed by the board as a part of the approval process. Thus, as a very general rule of thumb, in order to purchase a co-op, most co-op boards will require that you have liquid assets of at least one-third of the purchase price, irrespective of the amount for which you may be pre-qualified for a mortgage. So, if you are considering purchasing a $1,000,000 co-op, you should have at least $350,000 in liquid assets and be prepared to put down $200,000 in cash. Most boards will not consider buyers that just barely meet the building’s financing requirements and whose liquid assets will be virtually depleted after the closing. Though there are co-ops that are less stringent, the majority are entirely non-flexible in this respect.
- Typically lower purchasing price on per sq. ft. basis
- Less legal and financial responsibility for building maintenance and development
- Generally higher tax deductibles
- More complicated approval processes
- Generally higher monthly maintenance fees
- There may be re-sell and subleasing restrictions
- Less flexibility with apartment construction and renovation
Townhouses and Brownstones
Townhouses and Brownstones are freestanding 2-5 story buildings often constructed before the war. Brownstones are more elegant, featuring elaborate decorative facades and many other architectural details inside. Townhouses tend to be plainer with somewhat smaller living spaces (although be careful as the terms are often used interchangeably). These types of buildings are traditionally occupied by families who prefer the more private living environment. The actual buildings can vary from narrow and low-rise two unit row houses to large and elaborate brownstones that if not divided into units can have a living area of up to 10,000 sq. ft. Similarly the prices of these types of buildings differ dramatically depending on location, size, condition as well as their legal status.
- Comfort and privacy of your own home
- No approval process
- Larger living spaces / usually multi-level
- Total control over maintenance and improvement issues
- Easier to re-sell or transfer deeds than condos or co-ops
- Significantly higher purchasing price on per sq. ft. basis
- Higher monthly living costs, i.e., utilities, taxes, etc.
- More legal and financial responsibilities and obligations i.e., zoning codes, taxes, higher mortgages
- Maintenance related issues
Before you visit any apartments, unless you intend to pay all cash, it is important that you are pre-qualified with a mortgage lender that regularly lends in New York City. Please note that because New York is such a unique market (primarily because of the prevalence of co-ops), many of the large national mortgage lenders are not active in New York. There are several reasons why it is important that you are pre-qualified:
You will have a better understanding of the actual price range that you will be able to afford, thereby allowing you to focus your search. Often, buyers can actually afford more than they initially believe and therefore they waste time looking at apartments that do not actually meet their criteria;
Due to the competitive nature of the market, when you make an offer and if it is backed up with a pre-qualification from a recognized mortgage lender, the offer will then be much stronger than others from buyers who are not pre-qualified. In other words, by being pre-qualified you are giving yourself a competitive advantage over other buyers. Once your offer is accepted, having been pre-qualified will speed up the closing process.