Residential housing in New York City (NYC) is somewhat unique. We will take a look at the primary housing options for buyers in Manhattan. Apartments generally are either cooperative housing “co-ops” or condominiums “condos”. There are also some private housing options including townhouses and brownstones. In a co-op, you purchase shares in a corporation that essentially leases you a unit within the building. In a condominium arrangement, the transaction is generally a straight-forward purchase. Co-ops are more prevalent in buildings constructed prior to 1980, while condos are generally within buildings more recently built. There may be personal, financial, or lifestyle-related choices which may influence your decision. For both options, you will need to present financial data pertaining to income and assets.
Condos are typically in newer structures and more costly. Condos have an advantage in that they may be rented out. Co-ops, which are usually in older structures, have governing boards composed of residents that can refuse a sale to a party based on their discretion, as long as not based on discrimination. Co-ops tend to be smaller sized units and may not have the latest amenities compared to condos. Appraiser Jonathan Miller recently reported the median cost of a co-op to be $795,000; meanwhile, the median price for a condo is $1.39 million. Condos tend to appreciate more considerably; recent data suggest co-ops rose 22.5% in the last ten-year period, while condos increased roughly 45%.
Structure of Ownership
Co-ops buildings are owned by a corporate entity which issues shares, or stock certificates, in the corporation and a lease outlining the agreement provisions similar to a rental lease. They may contract with a property manager for maintenance. Their boards have significant influence regarding who buys a unit and may potentially force a shareholder to sell. Co-op law is within the realm of landlord-tenant law, which may allow more legal protections compared to condos. Purchasing a condo is similar to a single-family home, as you are issued a deed of ownership and a fractional interest in the common areas of the building. Condos have an elected board that is generally less intrusive, although owners may be fined for rule violations. The size of the unit owned has a proportional relationship to voting power within the board.
Co-ops customarily require monthly fees for maintenance, operational expenses, taxes etc. These fees may increase annually by roughly 5% and additional fees may arise for specific projects within the property. Recurring changes for condos, called common charges, also are subject to increases and special project fees.
Initial Costs/Down Payment
Co-op buyers need approximately 25% available for a down payment; however, it is possible to see fluctuations from 10% to nearly 50%. Buyers also must prove they have sufficient ongoing income. Most condos do not have established financing requirements, but the lending institution for the mortgage will. Both types of units may have requirements that additional funds be placed in escrow accounts in the event of nonpayment.
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