New York City Real Estate: Co-Op and Condo defined!

Written by Posted On Friday, 28 February 2014 04:23

This article was reprinted from the Hallmark Abstract Service website hereVisit and click on the Follow tab in the lower right-hand corner to have new articles delivered to your in-box!

Article Summary: If you are unfamiliar with the New York City housing market this article provides an explanation of the differences between buying a cooperative apartment (co-op) or a condominium (condo).

For anyone unfamiliar with the New York City housing market, residents there tend to have three basic options particularly in Manhattan: Rent or buy a Co-Op or a Condo!

Yesterday in an article here we examined the median rents that are being charged in the various neighborhoods of New York City for both 1-BR and 2-BR apartments with Tribeca placing first in each category as the most expensive (Median 1-BR and 2-BR Rents By Neighborhood in New York City! (Maps)).

When it comes to buying, however, the market tends to be split between co-ops (75% of the market) and condos (25% of the market) with each having unique characteristics and challenges for potential buyers (and therefore the eager sellers as well).

Many have heard the story's of celebrity buyers who have been turned down by co-op boards for a variety of factors including worries about paparazzi, aberrant lifestyle and crowds of fans among some of the top reasons for being voted down.

The Dakota on 72nd Street and Central Park West is famous (infamous) for having denied the likes of Cher, Billy Joel, Madonna, Carly Simon, Alex Rodriguez, Judd Apatow and Tea Leoni showing that merely having the price of admission does not guarantee it.

Courtesy of GlobalPost these are the fundamental differences between the New York City co-op and the New York City condo.

The global difference between condos and co-ops is simple: In a condo, you actually own your unit inside a multi-residence building, whereas in a co-op, you own a share of the corporation that owns the whole building, but your unit is actually leased to you by that corporation. The differences between condo and co-op ownership in New York City, however, is much more nuanced and is actively changing.

Property Inventory
Since the 1980s, co-ops have dominated the Manhattan real estate market. It's estimated that in the mid-1980s, co-ops constituted 85 percent of the market, but that percentage has dropped to about 75 percent in the current market. This percentage can be misleading, though, because co-ops are concentrated mainly in neighborhoods with older buildings. Neighborhoods with significant new construction may actually have more condos available than co-ops. So, when considering the differences between the two types of property, architecture is a significant factor. New construction will be sold mainly as condos, whereas pre-war buildings will most likely be sold as co-op shares.

Costs and Value
Condos are known to be more expensive in Manhattan, and this price difference goes beyond the sticker. The New York Times tells us that on the surface, condos can appear to be valued nearly 40 percent higher than co-ops -- but that in actuality, a condo is only about 9 percent more valuable than a co-op unit of the same size. This gap between expense and value is linked to the added costs that are inherent to buying and maintaining a condo. A condo will usually be larger than a co-op with the same number of bedrooms, so a buyer is paying for that added square footage. Condo buyers also have to pay higher closing costs and a mortgage recording tax, neither of which are involved in a co-op purchase. Finally, co-ops allow the owner to write up to 50 percent of her maintenance fees -- including insurance and property tax -- off of her personal taxes. Condo maintenance fees, by contrast, are money that the owner will never get back.

Getting Approved
The approval process to purchase a condo is very different than it is to purchase a share of a co-op. A qualified applicant for a condo cannot be rejected -- only precluded from buying the unit if the condo board chooses to purchase the unit first on the same terms. This is known as the condo board's "right of first refusal," and it rarely happens. When applying to purchase co-op property, by contrast, a buyer must not only be approved by the bank, but also the board. In New York City, these boards are notoriously rigorous -- even more rigorous than banks -- when approving someone for a mortgage, and require full disclosure of assets, credit and financial history. Although some condo buildings are beginning to require more financial disclosure from potential buyers, overall the approval process for condos affords the applicant much more privacy.

House Rules

Perhaps the biggest difference between co-ops and condos in Manhattan is the terms of ownership. Co-ops come with strict house rules -- the first of which usually prohibits subletting. Co-ops enforce these rules to protect the residents from transient occupants. While some buyers appreciate this protection and the higher quality of life it provides, others find it too restrictive, and want their property purchase to allow them all the freedoms of private ownership. Thus the appeal of a condo, which affords the owner the right to sublet at will, and thus have the option to earn income on her property investment.  


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Michael Haltman

Hallmark Abstract Service provides title insurance for both residential and commercial real estate transactions in New York State.

Hallmark Abstract President Michael Haltman is also extremely involved with the combat veterans 501(c)(3) Heroes To Heroes Foundation, serving as the Board Chair.

Hallmark Abstract Service

In 2008 we opened our doors focused on two primary goals:

Number one was to be a title insurance company that would provide clients with a superior finished product that completely protects their interests for what will likely be one of the largest transactions of their lifetime.

Number two was to insure that the experience of working with Hallmark Abstract Service was as easy and seamless as possible for all parties involved in the transaction!

From the number of satisfied clients who come back to Hallmark Abstract Service time after time for their title insurance needs, the evidence bears out that we have accomplished these two goals in the past and will maintain our client centric focus far into the future!

Michael Haltman

Post 1984 MBA in Finance from the State University of New York at Albany that concentrated on the tax-exempt market, Michael became a municipal bond analyst at Shearson/Lehman Brothers tasked with following general obligation issuers on the city and state level as well as housing bonds secured by mortgage pools.

This experience at Shearson/Lehman Brothers followed by stints at PaineWebber and Citigroup provided a broad framework and understanding of the real estate and mortgage markets.

As CEO of Exeter Commercial which underwrote and funded commercial mortgage loans as a correspondent lender, title insurance played a critical role in both the underwriting and closing process.

In 2008 recognizing both an opportunity and need, Hallmark Abstract Service was born.

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