In the previous two segments, we reviewed the basics of purchasing a co-op and condo apartment. Now it’s time to evaluate the pros and cons so that when the time comes to purchase in Manhattan, you know which property type is right for you and your family.
If you or your loved ones are planning to occupy the apartment, it makes a lot of sense for you to buy a co-op. Why? You will spend 25-30% less than for a condo and you will feel like you are living amongst a community of neighbors who know and care about each other. The cons of a co-op are that the board application process can be rigid and invasive, requiring the disclosure of detailed personal and financial information. If you don’t think you have the stomach for this or simply don’t want to disclose your financial life to a board of strangers, stick with buying a condo.
Condos cost considerably more per square foot than co-ops, but many feel it is well worth the price. Also, the approval process is much easier. The #1 reason buyers choose condos is the ability to rent upon purchase, i.e., no waiting period. Condos are the purchase of choice for non-U.S. citizens or for those who hold their assets outside of the U.S. In particular, new condo construction, i.e., a transaction in a new development in which the purchaser buys directly from the “sponsor” or developer, requires little personal information. You don’t have to show U.S. bank or asset accounts and there is no application or board intervention. Basically, if you can write a check, you can buy the apartment. So if you are skittish about the co-op approval process or you have Israeli relatives interested in investing in Manhattan, a condo is your best bet.
If you are looking to finance your purchase, lenders are still offering up to 90% financing of the purchase price, making a condo purchase more flexible than a cooperative. One lender I work with can offer 90% financing on a condo to a maximum loan amount of $625,500 (which means a purchase price of $695,000). Purchases for over $695,500 (jumbo loans) can get 80% financing up to $2,000,000. They also offer FHA loans with 96.5% financing up to $625,500 on buildings that are FHA-approved condominiums.
Co-op financing is a bit trickier. Co-ops require a minimum of 20% and some buildings require more. So you will need to have that amount liquid, plus boards look for at least two years’ worth of mortgage and maintenance payments in cash-ready investments. Banks cracked down on all financing after the 2008 Lehman collapse, but co-ops especially took a hard hit. Not only is personal financial information intensely reviewed but building financials, reserve funds, assessment patterns etc. also factor into this process.
Another big differentiator is closing costs. Condo closing costs are significantly higher because condos are considered “real property” and as such pay additional fees including the fee title insurance, mortgage title insurance and NYC mortgage tax. Both co-ops and condos have other standard fees that apply to the purchase of both.
As a result of the highly flexible rental policies in condos, some people feel that living in a condo is analogous to hotel living. It can feel transient with different “renters” coming and going, and some purchasers prefer a more community-oriented place to call home. Yet, others like the anonymity of condo living and prefer a more discrete lifestyle.
Whatever your choice is, whether you work with a realtor or not, do your research on the neighborhood, building and local area services. Good luck with your search and don’t hesitate to contact me for advice. It doesn’t cost anything to speak, I’m happy to offer some insights.
Amy Elfman is a Teaneck resident and a licensed Real Estate Salesperson for Klara Madlin Real Estate in Manhattan. Contact Amy at [email protected] or visit her webpage http://klaramadlin.com/brokers/Broker_bio.asp?id=98
By Amy Elfman
