Thinking of buying a NYC co-op? Read this first

For many first time buyers of NYC co-ops, it can be an education to really understand what it means to buy as well as live in a NYC co-op. Here are some examples of differences between a co-op and condos which are closer to what most buyers are familiar.

1- Co-ops limit financing typically to 80% of the value of the property. So if you purcharse a co-op for $1million you can normally finance only $800k. Some co-ops will allow even less financing or no financing at all as is the case on some select buildings on Fifth avenue on Manhattan’s upper east side. Condos in some cases will allow as much as 90% loan to value. So a $1million condo can be purchased in some cases with as little as $100k down.

2- There are restrictions on subletting. Typically co-ops will require that a purchaser live in the apartment for at least two years then subletting will be allowed for 3 years and after that you must move back in or sell. So co-ops will not be the property of choice if you are expecting a job transfer soon or looking to relocate in the next few years. Condos typically do have subletting restrictions.

3- You will need to disclose all of your financial information in a co-op application including bank statements and tax returns…Even after all that disclosure the Board can turn you down without having to give a reason. Condos can also ask for a mountain of paper work but only have to give a waiver of the right of first refusal. If you were purchasing the condo at far below market, the condo has the right to purchase it instead of allowing a below market sale to go through. This is rare.

4- Co-op Boards range from small, reasonable buildings to very difficult, exclusive Boards. Speak to your real estate broker for feedback on listings that you are seeing.

5- Having said that all that , co-ops sell at a discount versus a similar sized condo. About 30%. The monthly costs are higher in co-op than a condo. So a 2bd/2ba co-op might cost $1.8 million on the Upper West side with monthly charges of around $2500 for 1200 sqft. The same size condo would cost about $2.3 million and the monthlies might run about $2000.

6- If you like prewar buildings which have more architectural design elements, lovely classic lobbies and gracious layouts, you will probably need to look at co-ops. Condos tend to be  newer buildings and have more desirable modern amenities like a gym, roof deck and laundry in the apartment.