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Buying a Coop in NYC. What Do You Need To Know?

Founding Member of Moshes Law, P.C.
During his years of practice, Yuriy has concentrated in litigation and real estate transactions as his areas of expertise.

Buying a co-op in NYC is unlike other property purchases in the Big Apple. If you are considering purchasing a co-op in NYC or you are in the process of buying a co-op, you may have many questions. What is a co-op board interview? Do I need an attorney? What is the co-op approval process like? 

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    At the Law Offices of Yuriy Moshes, our experienced New York real estate attorneys are here to help you with your co-op purchase and to answer any questions you may have.  To help you with some of your potential concerns and questions, this article will give you a quick rundown of what you can expect when purchasing a co-op and what the contract negotiation process may involve. 

    What is a Co-op in New York City?

    Co-ops are a unique living arrangement in New York and some other areas that allow a buyer to essentially purchase an interest, also known as shares, in the corporation that owns the building in which the buyer plans to live. Think of it like buying stock in any other corporation, except when you buy shares in a New York co-op (a.k.a. cooperative), you receive in return the right to a proprietary lease of a particular portion of a building. With the purchase of a traditional apartment, the purchaser is buying a specific piece of the building and has ownership rights to that portion of the building. Alternatively, with a co-op, the purchaser is a shareholder in the company that owns the building in which the purchaser lives. As a shareholder in the corporation, the purchaser has certain rights to vote on decisions that involve the building the co-op owns. 

    10 Steps to Buying a Co-op in NYC 

    1. Get Professionals to Assist You

    Buying a co-op can be very different from other experiences you may have had when purchasing property. Preparing a solid team of professionals to help with your purchase will help ensure that your purchase goes smoothly and that you can move into your new home as soon as possible. Your team should probably include: 

    • A Mortgage Broker: A good place to start when you are looking for a co-op is with a great mortgage broker. The right mortgage broker can help you determine the right amount you are able to spend and find financing options that are best for your needs. 
    • A Lawyer: If you are buying a co-op in NYC, an NY co-op attorney is an essential part of your co-op buying team. Because buying a co-op is more like buying interest in a company than a traditional real estate purchase, having a lawyer help you throughout the co-op buying process will ensure that your interests are protected along the way. A good co-op attorney will help negotiate the terms of your agreement with the co-op, review your contracts with the co-op, and assist you with the closing process, assuring that your interests are thought about every step of the way. Without an attorney, you may find that the co-op deal is not as favorable to your needs as you may think. Having a co-op attorney will help you make the best deal possible. If you are thinking about purchasing a co-op in New York, contact the law offices of Yuriy Moshes today for a free consultation. 
    • A Real Estate Broker/Agent: The right real estate broker will listen to you, take your needs into consideration, and work hard to find the right place for you. Likewise, a good real estate broker will attend showings with you and help you schedule tours of co-ops in NYC so that you can get a great understanding of what options are available to you. The right real estate agent is an important part of your co-op purchasing team. 

    2. Search for Your New Home

    With your team assembled, you can then begin the search for your new home. Co-ops are the most common type of home in NYC. So, you may find a lot of options that fit what you are looking for. Your real estate agent can help you narrow down your options and think about all the details that may ultimately impact your decision to buy. 

    buying a coop in nyc

    3. Co-op Appraisal in NYC

    Once you have found the co-op that is right for you, the next step in buying your NYC co-op is getting an appraisal. Before a lender will help you finance the purchase of the co-op, your lender will want to have an appraisal of the property completed to ensure that the loan amount does not exceed the value of the co-op. Appraisals typically consider:

    • The property itself (it’s location, interior, and other aspects)
    • The square footage of the co-op apartment you are buying
    • How the co-op is managed and controlled
    • And other factors specific to the lender. 

    4. Ensure You Qualify To Purchase

    Before you submit an application to show you are interested in purchasing a unit within a co-op, you should always make sure you qualify to purchase the property. Co-ops vary in the amount of financing that they will accept and the amount of a down payment required before you can purchase. Many co-ops require anywhere from 20 to 28% in a down payment when financing is involved. Many co-ops also require a few years of maintenance and storage payments to be covered before or after closing, too. Working with your lender to make sure you qualify will save you from making an offer on a co-op that you cannot actually afford.  

    5. Make An Offer

    Once you know you qualify, you can make an offer on the co-op! This is very exciting. What your offer is required to include will vary slightly depending on the co-op in which you plan to purchase. At the point, you are ready to make an offer, your experienced NY real estate attorney will become very handy. The offer on the co-op is typically a type of sales contract that delves into the terms and conditions of your purchase agreement with the co-op. Your attorney will help you submit a purchase agreement and overall offer that are most likely to help you purchase the property successfully while also taking your best interests and needs into consideration.

    6. It’s Time To Sign the Contract! 

    If the co-op board members agree to accept your offer, you can then move on to the contract signing stage. At the contract signing, buyers often submit a 10% deposit to the seller’s attorney that will be placed in escrow until the closing process is complete. The co-op contract will lay out how you plan to pay for the co-op and what the terms of your living in the co-op will entail. After signing the contract, you will officially have an agreement with the co-op owners that says the property belongs to you unless some part of the terms in the contract fall through (like you are suddenly unable to obtain a mortgage to pay for the co-op). 

    7. Receive A Co-Op Mortgage

    Once you have an agreement that says you have a right to the co-op you can officially go to the mortgage company and finalize the details of your mortgage agreement for the co-op. It is best to receive pre-approval for a mortgage from a lender before you even begin looking at co-op options. Receiving pre-approval will speed this part of the process up and allow you to finalize the purchase of the co-op faster. 

    8. Prepare For The Co-Op Board Interview

    When your financing is finalized and you are ready to move forward with finalizing your purchase, you will next need to submit your final purchase package (“board package”) to the board of managing shareholders at the co-op. The board will review your package, which includes various financial statements and other documents that demonstrate your ability to afford and your desire to live in the co-op (like your debt-to-income ratio), and then schedule a time to meet with you for the co-op board interview. At the interview, the board will just review your information and talk to you about your interest in joining the community. The best rule of thumb is to treat the board interview like a job interview and to act as professionally as you can. 

    9. Complete The Final Walk-Through

    The final walkthrough allows the purchaser to inspect the property one last time before finalizing the deal. The walkthrough will help you ensure that the property meets your expectations and that it is everything you want. 

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      10. Attend the Closing For Your New NYC Co-Op

      Congratulations! You made it to the closing! Closing on your co-op is the last step in the purchase process before you are able to move into your new home. At closing, your attorney will help you protect yourself from any last minute bad deals or surprises, such as hidden issues in the closing documents. At the Law Offices of Yuriy Moshes, our attorneys have helped purchasers and sellers with countless closings and we want to help you, too. Contact us before your closing to help ensure all of your best interests are taken into consideration. 

      What Are the Advantages of Buying a Co-op Apartment?

      Co-ops have many benefits when compared to other homes you can purchase in NYC. A few of the benefits are listed below: 

      • They’re Cheaper Than Condos: Co-ops typically are cheaper than traditional condominiums in NYC. Co-ops tend to be cheaper for a variety of reasons, including that they tend to be in older buildings. Co-op closings also tend to be less expensive, which brings the overall cost of co-ops down.
      • Co-ops Usually Have More Inventory to Choose From: Because co-ops are more common than condos in NYC, buyers usually have more co-ops to choose from in comparison to traditional condos.
      • Co-Ops Tend to Be Financially Stable: When you buy into a co-op, you become an owner in the building in which you live, whereas in a traditional condo, the building is owned by an investment developer. Because co-op owners have a direct interest in the success and longevity of the co-op, co-op owners are notoriously picky. The co-op owners want to ensure that new owners care about the property and community, too. The care and attention that co-op shareholders pay to the facility and its members tend to provide more financial stability. 
      • Co-Ops provide A Sense Of Community: Co-op owners all own part of the company that owns the building, meaning that they have an interest in how the property is maintained. Each owner is more likely to want to know about the other owners in the building and more likely to be involved in decisions that impact the building. This leads to more connectedness in comparison to a traditional condo building where each owner only is concerned about his or her individual unit. 
      • They Offer More Leverage in Disputes: co-op boards have the power to impose fines on owners that do not comply with the co-op’s rules and can even evict certain offenders, if necessary. Alternatively, condo owners cannot do much about problems involving fellow condo owners. 
      coop mortgage

      What Are the Disadvantages?

      • The Co-op Board Wants to Know Everything About You: The co-op purchasing process involves disclosing a lot of personal information to the co-op board. The co-op board needs to know a lot about you in order to protect the co-op’s interests. This is important for co-op owners because it ensures that new buyers will take care of the premises and treat the co-op properly. But, it means that prospective buyers need to provide personal documents about financial matters and other personal information to the board.
      • Co-ops Often Have Older ConstructionThe co-op board typically must approve renovations or new building projects. The co-op board wants to protect the financial stability of the building, so the board is not always likely to approve the newest and most expensive changes to a building. Likewise, co-ops tend to be buildings that are older, just because of how co-ops are established. This means that co-ops may not always have the newest amenities a person might find in a new condo. 
      • Co-ops Are Less Flexible Than Condos: Living in a co-op means that you agree to abide by co-op rules and meet the co-op’s standards before buying into the co-op. So, many buyers may not fit the requirements that could be acceptable in a traditional condo. 
      • They Take Longer to Close: Because co-ops have a lot of pre-purchase approval requirements, co-ops typically take longer to close than other homes in NYC. 

      FAQ: 

      What is the key difference between a co-op vs a condo?

      The key difference between a co-op and a condo is the type of ownership interest the buyer purchases. With a co-op, the buyer receives an interest in the co-op (a corporation) rather than a direct property interest. Alternatively, the condo-purchaser receives a direct interest in the physical property in the unit that they buy.

      What is a flip tax?

      A flip tax refers to a transfer fee that a buyer or seller pays to the co-op when the co-op apartment is sold. Flip taxes vary depending on the co-op. You can usually find information about the flip tax in the co-ops proprietary lease.

      How much are co-op closing costs in NYC?

      In NYC, co-op closing costs generally are around 1% to 2% of the share the co-op owner purchases. Fortunately, closing costs on NYC co-ops are generally lower than other properties. There are many reasons co-op closing costs are lower, including that purchasers do not pay the mortgage recording tax and that the sale price is based on the investment in the co-op rather than the property itself.

      What is the co-op board approval process?

      The NYC co-op board approval process is the process in which the board reviews all the information you provide to ensure that you are a good fit for purchasing the condo. The approval process will allow the co-op board to either accept or reject your proposed contract with the co-op and determine whether you can buy into the co-op.

      Why are co-op buyers typically rejected?

      The co-op board’s decision to reject a buyer typically is very subjective. It can be because the board feels a buyer is not financially stable enough to invest in the co-op, or it simply can be because the board feels the buyer will not make a good neighbor.

      How a Co-op Attorney in NYC Can Help You?

      At the Law Offices of Yuriy Moshes, our experienced NY real estate attorneys know how to help co-op buyers get into co-ops and how to make sure the co-op agreement will meet the buyer’s needs.

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      We want to help you find the home of your dreams and protect your interests while moving into your new place. Contact us today to see how we can help you.

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