The Difference Between Buying a Condo & Co-op in NYC—Explained in Inches

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Contract of sale for a condo in a new development

Many are surprised by the amount of paperwork it takes to purchase a co-op or condominium apartment in New York City.

As a real estate broker in Manhattan for over 17 years, I’ve put together numerous condo and co-op purchase applications.

Recently I photographed some of the applications and the pictures show a major difference between buying a co-op or condo apartment.

A great thing about buying an apartment in a new condominium development in NYC is that you do not have to fill out a purchase application. All you need to do is sign a Contract of Sale that is generally 15-20 pages. *

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Purchase application for a co-op
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Purchase application for a co-op

In order to purchase an apartment in a co-op an applicant must first be approved by the co-op board of the building.Applicants must verify their net worth by providing backing account statements and tax returns thus the extensive purchase applications for many, especially those who own their own businesses.

The co-op board reviews the applicant’s purchase application and conducts an in-person interview.

After this process the co-op board will either accept or reject the applicant. There are only two legal grounds for rejection. One is based on financial criteria and the other is if the co-op board believes that a potential purchaser(s) is willing to comply with the rules of the building.

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Purchase application for a condo resale

With a resale in a condo building there is no board interview but the buyer still has to fill out a purchase application. Many condo buildings now require buyers to submit an application that includes much of the same information requested by co-ops but in general, co-ops have stricter financial requirements.

The Board of Managers of the condo building reviews the application and they have what’s called the “right of first refusal” which means they can preempt the sale by offering to purchase the apartment on the same terms. Condo boards rarely have the financial means or inclination to exercise their right of first refusal however.

Following are some other differences between co-op and condo apartments in NYC.

COST

<>Condos are usually 9-40% more in price than a co-op.

<>Buying a condo also involves additional closing costs because a purchaser must get title insurance ($3,000-$4,000) and there is a mortgage recording tax, which in New York City comes out to approximately 2% of the face value of the mortgage. Total closing costs for buying a condo resale is approximately 3% of the purchase price.

<>With a condo you can make a 10% down payment and finance the rest but co-ops require purchasers to put down at least 20%. Each co-op building has the right to set their down payment requirements. Some of the more exclusive buildings require up to 50% down or even no financing at all.

INVENTORY

<>There are more co-ops than condos in NYC—the ratio is about 70% co-op and 30% condo. Over the years the condo percentage increases as apartments in new developments and conversions are almost always sold as condos.

RULES & REGULATIONS

<>Tougher vetting by co-op boards generally means more financial security for the building.

<>In most cases, co-ops have a higher rate of owner occupancy than condos as co-ops usually impose restrictions on whether you can sublet your apartment or use it as a pied-à-terre. Many co-op buildings prohibit renting of apartments. Co-ops that do allow renters usually reserve the right to approve them and often limit the duration of the rental to one or two years

<>If you purchase a co-op apartment, you technically do not own your apartment from a legal standpoint. Rather, the entire building is owned by a single corporation, of which you own shares. The larger and higher priced apartments receive more shares. Owners of co-op apartments are considered tenants, which gives them legal protections under New York City landlord-tenant law that condominium owners don’t receive.

 

*If you are getting a mortgage, there will be paperwork required by your lending institution.