Archive for Condo
What’s The Difference Between a Co-op and a Condo?
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Caught in the maze of buying an apartment in New York City? The rules are different in New York City than in other parts of the country! For the inexperienced some of the differences may be perplexing, however, we can guarantee that if you do your homework and keep this guide handy, the process will flow much more smoothly.
New York is a city comprised mainly of cooperative and condominium apartments with a smaller selection of private homes, which we call townhouses or brownstones. Most important is understanding the differences between the types of apartments you will find in Manhattan.
Co-operative Buildings
Cooperatives are not a new concept, although they seem to be a type of ownership that is more common in New York City than elsewhere in the United States. In New York City, approximately 80% of our apartments available for purchase are in cooperative buildings, while 20% are in condominiums. This means two very simple things to potential buyers in New York City:
- There is more inventory to choose from if the buyer includes co-ops into the mix of properties, and
- Prices are, in general, more attractive for cooperatives – simple supply and demand.
Cooperatives are owned by an apartment corporation. Individual tenants do not actually “own” their apartments as they would in the case of “real” property. Owners, (shareholders) of co-op apartments, actually own “shares” in the corporation which entitles them to a long-term “proprietary lease.” The corporation pays the total amount of the building’s mortgage (importantly, a cooperative may have an underlying mortgage on the entire building, whereas a condominium building must be owned outright), real estate taxes, employee salaries, and other expenses for the upkeep of the building. The tenant-owner, in turn, pays a portion of these expenses as determined by the number of shares the tenant owns in the corporation. Share amounts are dictated by apartment size and floor level.
The considerations when buying a cooperative are:
- The Board of Directors has the right to “approve” or “reject” any potential owner. The board, elected by all of the tenant-owners of the co-op, interviews all prospective owners. It has the responsibility of protecting the interests of all tenant-owners by selecting well-qualified candidates.
- The quality of services and the security of the building are kept at high standards.
- Portions of the monthly maintenance are tax deductible. Each building has its own tax structure, but all co-ops offer a tax advantage. Shareholders can deduct their portion of the building’s real estate taxes, as well as their proportionate share of the interest on the building’s mortgage.
- The amount of money that may be financed is determined by each cooperative. Some buildings require substantial down payments. Generally speaking, in Manhattan prospective purchasers should be prepared to “put down” at least 20 to50% of the purchase price (depending on the building) when purchasing a cooperative apartment.
- Subleasing a co-op must be approved by the Board of Directors of the cooperative. Each corporation has its own rules, and they should be examined if a potential owner intends to sublet.
With this in mind, it is important to remember that co-ops are the norm here in Manhattan, not the exception. However, before beginning a search for a cooperative apartment, think about the financing limitations and the application and interview process.
Condominium Buildings
While condominiums are quite common throughout the country, they are a rather new concept for New York City. A condominium apartment in Manhattan is real property. The buyer gets a deed just as if he were buying a house. Since this is real property, there is a separate tax lot for each apartment. Hence, this means the buyer pays his own real estate taxes for the property. An owner will also pay common charges on a monthly basis. Common charges are similar to maintenance in a cooperative. However, they will not include real estate taxes since these are paid separately, nor will they include the building’s mortgage and interest given that a condominium, by law, cannot have an underlying mortgage. Condominiums are attractive for a variety of reasons:
- Financing the purchase of a condominium apartment is governed by the financial markets not a board of directors and thereby much more flexible than in a cooperative. In the past, a buyer could finance up to 90% or more of the purchase price. However, with the current conservative credit practices, you should be prepared to “put down” about 20% or more even for a condo.
- An approval process is usually required, and most condo boards are requiring application packages with financial disclosure. Generally, however, the requirements are not as rigorous as the co-op boards. A board meeting may or may not be required. The length of time for approval varies from building to building, but it is usually not as long as a co-op approval process.
- There is greater flexibility in sub-leasing your apartment. This makes condominiums the better choice for investment property.
- They are the ideal choice for non-U.S. citizens or for those with their assets held outside of the United States given that co-ops are unlikely to approve a buyer whose funds are not in the U.S.
Given that there are fewer condominiums than cooperatives and that they are “easier” to purchase, they are generally more expensive than co-ops. Additionally, monthly combined common charges and real estate taxes in a condo are typically less than a co-op’s monthly maintenance charges, again resulting in higher purchase prices.
Excerpted and modified from Prudential Douglas Elliman.
More Flexibility for Manhattan Condo Buyers
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Condominium buyers in the New York area often paid little mind to Federal Housing Administration mortgages, either because these government-backed loans had relatively low dollar limits or because federal rules put them beyond the reach of most condo associations.
But last year, the federal government raised the maximum F.H.A. loan amount to $729,750 from $362,790 for high-cost areas like Manhattan and northern New Jersey. It recently extended that ceiling through 2010. F.H.A.’s new rules will open an important lending option to condo buyers, especially those with weak credit.
- Although interest rates may be higher, borrowers with credit scores as low as 600 can often qualify.
- They can secure a mortgage with a down payment of less than 5 percent. The downside, though, is that borrowers must pay an F.H.A. insurance premium, similar to private mortgage insurance. On a $729,750 mortgage, the maximum conforming mortgage in New York City, with a high LTV (say if you put down 5% on a $768K condo), that could add over $450 to the monthly payment.
- Most condos include in their ownership agreements the “right of first refusal.” Such language grants the condo association the right to buy a unit at the price listed by the unit’s owner. In the pastt FHA had barred such clauses but now that restriction has now been dropped.
- The government has also streamlined the process for lenders that want to qualify a condominium for the F.H.A. program. Lenders can now approve condos without applying to the government, if they believe the condominium complies with F.H.A. lending policies. The F.H.A. will permit these “spot approvals” until Jan. 31, 2010, but lenders say they are hopeful the government will extend the policy beyond that date.
- The government also relaxed rules that had limited the number of condominiums that would qualify for F.H.A. loans. Under the old rules, if more than 50 percent of a new development was unsold, the F.H.A. would deny a loan. Now, just 30 percent of a development must be sold before an F.H.A. borrower can qualify.
- In addition, the old rules capped, at 30 percent, the share of condos that could have F.H.A. loans in a given development. Now the figure is 50 percent.
Graph and above points excerpted from November 20, 2009 NY Times article by Bob Tedeschi
Buying A Manhattan Apartment Soon? Want A Co-op or Condo Mortgage? Better Plan Ahead
Posted by: | CommentsAccording to a new J.D. Power and Associates study the average time required to approve and close a home loan has increased to nearly 47 days, compared with approximately 30 days in 2008. The reason? Increased scrutiny of loan applications and higher origination volumes driven by increases in refinancing. Not surprisingly, the longer wait times are fueling a decline in overall customer satisfaction with primary mortgage lenders.
The study also finds that credit scores are now higher among mortgage customers and the percentage of loan applicants who have been faced with requests for additional documentation has increased considerably—to 45 percent in 2009 from 33 percent in 2008.
“While the more cautious approach to underwriting mortgages is justified, the longer turn times and more numerous requests for information tend to have a negative impact on satisfaction,” said David Lo, director of financial services at J.D. Power and Associates. “Good underwriting and delivering a satisfying customer experience are not mutually exclusive, and some of the negative effects of a tightened lending environment can be mitigated by simply improving communication between lenders and customers.”
The 2009 Primary Mortgage Origination Satisfaction Study measures customer satisfaction in four key factors of the mortgage origination experience:
- application/approval process
- loan officer/mortgage broker
- closing
- contact
According to responses from more than 3,400 consumers who originated new mortgages within the previous 12 months here’s the top mortgage lenders BB&T (Branch Banking and Trust) 783 out of 1,000, Wachovia 781, National City Mortgage 769, SunTrust Mortgage 769, Wells Fargo 754, Flagstar Bank 744, GMAC Mortgage 744, Bank of America, 741
Plan
Long Island and Hamptons/North Fork 3Q 2009 Residential Sales Market Reports
Posted by: | CommentsJust released today are the new 3Q 2009 Residential Sales Market Reports for Long Island and Hamptons/North Fork prepared by Miller Samual Inc. for Prudential Douglas Elliman.
Median sales price was $700,000 in the third quarter, down 4% from $729,000 in the same period last year, but up 2.9% from $680,000 in the prior quarter.
In a release of pent-up demand, there were 459 sales in the third quarter, 49.5% more than the second quarter and 29.3% more than the same period last year.
Despite the surge in sales this summer, third quarter listing inventory expanded 5.8% to 2,419 properties compared to the prior quarter as sellers attempted to take advantage of the newly active housing market.
Days on market for properties that sold during the third quarter expanded to 198 days from 173 days at this time last year. The surge in demand enticed sellers to leave their property on the market, which drove this indicator higher.
The listing discount, the distance buyers and sellers had to travel to agree on price, expanded to 16.9% in the third quarter from 10.2% in the same period last year.
The number of sales in the third quarter jumped 41.6% to 5,603 properties above prior quarter levels and was 5.9% above the number of sales seen during the same period last year.
The increase in the number of sales has reduced the number of properties available for sale. There were 22,170 properties listed for sale at the end of the third quarter, a 10.1% decline from the 24,672 listing inventory total of the same period last year.
Median sales price was $375,000 in the third quarter, up 4.2% from $360,000 in the prior quarter, but remained 9.6% below the $415,000 of the same period a year ago.
Days on market, or the time it took to market a property, was 116 days, essentially unchanged from 115 days in the same period last year, but was 10 days faster than the prior quarter.
The listing discount, which is the difference between the list price at time of sale and the contract price, was 6.5%, up nominally from 6.4% in the same period a year ago.
Every quarter I find it fun and interesting to read what the pundits have to say after the Manhattan Real Estate Market Reports are published. As you can see below, the 3Q Manhattan Market Overview created quite a lot of buzz. This report was prepared by Miller Samual Inc. for Prudential Douglas Elliman.
I think the discussion of the 3Q market trends is best summarized in this special report podcast on The Housing Helix by the report’s creator Jonathan Miller .
| 10/02/2009 | The New York Times | Manhattan Apartment Sales Spike in 3Q; Prices Vary | Newspaper | |
If you’re a first time homebuyer in New York City and you can close on an apartment by December 1st 2009, you may be wondering how you can leverage the $8,000 tax credit to buy your first condo or co-op. The question then comes to mind, “How much can I afford or want to spend on my new home?”
The first thing you need to know is that a couple (or two individuals jointly) buying their first home who want to use the Federal Housing Tax Credit can only have an annual combined income of $150,000 or $12,500 per month.
When you apply for a mortgage, the first thing the mortgage broker or lender is will calculate is your debt-to-income ratio. This ratio takes into account your monthly debt including the monthly mortgage payment, maintenance (for co-ops) or common charges and taxes (for condos), student loans, car payments credit card payments etc. They like to see that your total monthly debt expenses do not exceed 40% of your monthly income. If your gross monthly income is $12,500, then your total monthly debt cannot exceed $5,000 (12,500 x 40%).
The calculation above may be adequate to receive financing for a condo purchase, but many coops only will allow your maximum monthly housing expenses (principal and interest payment on the mortgage and maintenance), to be typically 28% of your monthly income (could be 25% or lower for some co-ops, which is the limit set by the co-op board, not the lender).
Using a limit of 28% for housing expenses, a buyer with an income of $12,500 per month would have approximately $3,500 per month to spend on housing expenses.
So depending on the amount you have for a down payment (assume at least 20%), the mortgage rate and other debt, you may be able to spend between $3500 and $5000 per month to for your Manhattan co-op or condo.
You can use this link to StreetEasy.com to adjust the variables and see what’s available for you based on your personal circumstances.
See a video here and read the FAQ here
Is it Difficult For A Foreign National To Get a Mortgage in New York City?
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There is a common misconception that it is more difficult for foreign nationals than for American citizens to get a mortgage in NYC. In fact, there are some restrictions, but it is perfectly possible for foreigners to get mortgages for New York City home purchases.
Foreign nationals obtain a mortgage like anyone else
Foreign nationals can approach local NYC banks, national lenders, credit unions and mortgage brokers to apply for a mortgage. Not all lenders offer foreign national programs, but they are readily available.
As a foreign national, one must be prepared to put a down payment as high as 40% of the purchase price—required by the lender because it typically will only loan 60-80% of the purchase price. Interest rates are reasonably priced and there are no forbidden property types so you can finance a condo and a co-op just as easily as a single-family home. Some lenders will require you to prove your Visa status or type of Visa you possess that gives you permission to be in the United States, be it for a business or a pleasure trip or to come to the U.S. to work, study, conduct business or immigrate.
Foreign nationals who hope to purchase co-ops will need to go before the co-op board, just as citizens do. The co-op board may impose its own requirements such as requiring a green card, U.S. tax returns and other conditions. Co-op restrictions may make it more convenient for foreign nationals to purchase condos because the bylaws and rules of condo associations are typically less restrictive than those of co-ops.
If the purchase is strictly for investment purposes I would recommend the purchase of a condo. That said, in New York City, there are “condops” (a cross between a coop and a condo) which may allow you the flexibility as an investor but at a lower cost.
The bottom line is that a foreign national can obtain mortgage financing just like a The bottom line is that a foreign national can obtain mortgage financing just like a U.S. citizen would in order to establish a NYC mortgage. Find a lender that offers foreign national loans and apply for the mortgage. Then sit back and wait for information to be processed—just like a U.S. citizen would have to do.
Condops: Co-ops for the Free Spirit
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Co-op, Condo or Condop?
If you yearn for the freedom of condo living but your pocketbook won’t stretch beyond the co-op price range, a condop may be perfect apartment for you. To understand the differences and what they mean to your budget, here’s a quick rundown on the basics of modern living in Manhattan: co-ops, condos and condops.
Co-ops are by far the most common form of apartment ownership in Manhattan – over 70 % of available apartments for sale are in co-op buildings. Co-op means cooperative ownership. Rather than owning your apartment, you become a member of the corporation which owns the entire building and you own shares in that corporation. Monthly maintenance fees cover building expenses including heat, hot water, insurance and staff salaries. In addition, your maintenance charge also includes real estate taxes and your apartment’s share of the underlying mortgage on the building. A portion of these maintenance fees (taxes and interest on the building’s mortgage) are tax-deductible.
Co-op boards play a huge role when you want to purchase or sell your home. You will be required to submit detailed financial information, tax returns, and personal and business reference letters and appear for a personal interview in order to gain the approval of the board before you can purchase your home. In addition, some boards may not allow you to sublet your apartment and may even have a say over the selling price, since a below-market sale could affect everyone else’s investment.
A condop is a co-op with less restrictive condo-type rules.
A Condo, short for condominium, is an alternative choice for apartment ownership. The number of available condos has grown in recent years, especially in new construction. When you buy a condo, you own your apartment outright just like you would own a single family house. You don’t have to go through the board approval process. And once you’ve bought, you have more control over your home. Usually, you can rent it out to anyone you choose and when you are ready to sell it, you don’t need to deal with board approval for your buyer as you do in a co-op.
Monthly maintenance fees -called common charges- are usually lower than co-op maintenance charges, but don’t provide any tax deductions because there is no underlying mortgage on a condo and you pay property taxes on your apartment directly to the city.
So what’s a condop? Simply put, a condop is a co-op with less restrictive condo-type rules. With condops you still need to play well with others and you own shares in the co-op but the rules are often more relaxed than the standard co-op. Condops, like most condos, may allow you to finance a higher portion of the price by requiring lower down payments, and usually there will be no high-stakes personal interview with the board.
In a condop, like a co-op, some of the monthly maintenance fees are tax-deductible but like a condo you’re usually relatively free to rent your apartment, use it as a pied-a-terre, may be able to have live/work space and may be able to sell your property more easily. Prices for condops are usually lower than comparable apartments in condos.
Not all condop buildings have these flexible rules, so you need to study individual listings carefully when looking for condops, and be sure your buyer’s broker and attorney are familiar with their structure.
Brooklyn Residential Sales Report For Q2 2009
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Miller Samuel, an independent appraisal firm, and Prudential Douglas Elliman real estate today released the Brooklyn Market Overview.
This quarterly survey of Brooklyn residential sales analyzes the 1428 sales of condos, coops and 1-3 family properties that closed in the second quarter of 2009 and compares the data to first quarter sales of this year as well as the same quarter sales of 2008 thus adjusting for seasonality.
The luxury market subcategory was also included in the analysis and represents the top 10 percent of all coop, condo and 1-3 family sales.
Queens Residential Sales Report For Q2 2009
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Miller Samuel, an independent appraisal firm, and Prudential Douglas Elliman real estate today released the Queens Market Overview.
This report of Queens residential sales analyzes the 2129 sales of condos, coops and 1-3 family properties that closed in the second quarter of 2009 and compares the data to first quarter sales of this year as well as the same quarter sales of 2008 thus adjusting for seasonality.
The luxury market subcategory was also included in the analysis and represents the top 10 percent of all coop, condo and 1-3 family sales.
What a great July 4th weekend! Our visit to Boothbay Harbor, Maine included lobster dinners at the Lobster Dock restaurant which has wonderful views of the bay.
Mitch, the owner buys fresh lobsters daily from the local fisherman who dock their boats in the bay near this well known lobster shack. They are boiled in sea water and are accompanied by corn on the cob and a biscuit! Don’t forget to check out the crispy onion rings.
But the Lobster Dock is not just a one trick pony. Lobster rolls, lobster stew, creamy and and fresh clam chowder and amazing crab cakes are also featured there. You might recall the crab cake throwdown between Mitch and Bobby Flay from the Food Network.
While in Booth Bay I couldnt resist checking out a few of the condos. On Trulia I found 12 listings in Boothbay Harbor. They ranged in price from a $279K 2br/1.5bth 1360sf condo to a $475K 3br 3bth 2200sf unit with water views.
We drove by four of them just ”steps away” from the Lobster Dock as we drove in for our pre fireworks dinner.
On the water 3br 3bth 2200sf condo-$475K
Interestingly, I tried to get comparable selling prices but that information doesn’t appear to be publically available. Like in the old days, I guess you have to check with one of the local brokers who are the price/information gate keepers. I didnt have time to visit the county clerks office because we were on our way to visit the town’s July 4th picnic bash.
At the picnic, my wife needed to have a taste of the cherry pie. Since it wasn’t available ala carte, I was “forced” to get the barbecued chicken which included the pie! Hmm that was good.
