Over 75% of residential buildings in NYC are co-ops. Condos are generally more expensive per square foot. For example, an identical co-op and condo unit might be priced at $1,250,000 and $1,450,000 respectively. There are a few reasons for this, one being that the purchase process is easier when you are buying a condo.
Co-ops have strict requirements for their purchasers and their boards can turn down potential buyers if they do not qualify. In a co-op, the prospective purchaser must pass a financial review as well as an in-person board interview.
Working with you as your buyer’s broker, we will evaluate whether your finances and qualifications are appropriate for the co-op you wish to purchase so that you do not have to spend time going through the process when a refusal is likely. We will also prepare you for the board interview, which is a meeting with a few board members that usually lasts about 15 minutes but for some buildings may be more formal and last longer.
CO-OPS: WHAT YOU NEED TO KNOW
When purchasing a co-op, you are required to complete a purchase application, which includes a financial statement. You will need to provide a list of all your assets and liabilities. This includes cash in banks, and all other liquid assets (including investments and funds that can be liquidated quickly). You also must provide information on non-liquid assets, such as retirement funds. You will have to provide proof for such financial information, including bank statements, W-2’s, tax returns, investment statements, etc.
- Other paperwork will include either a letter of employment or a letter from your accountant, 2-3 personal recommendations and 2-3 business recommendations. These letters are standard and we will provide samples for you.
- Often, a co-op board’s financial requirements are even more stringent than a bank’s requirements for a mortgage. Each co-op sets an amount that you are allowed to finance. Typically, co-ops that require purchasers to put down 20%-30% have the following financial requirement: your combined annual mortgage and maintenance payments cannot be more than 28% of your income.
Under this scenario, if your mortgage and maintenance payments total $3,500 per month, you need to make approximately $150,000 per year. In addition to that, you need to show the equivalent of at least 2 years of maintenance and mortgage payments in liquid assets remaining in your accounts after the down payment. For retired individuals, the employment requirements do not apply, but the assets are very important.
Luxury buildings often require 40%-60% down and usually insist on even more liquid assets. The amount of the down payment up to the entire purchase price may be required, especially in co-ops on Park, Madison and Fifth Avenues.
THE OFFER PROCESS
Initial offers are submitted in writing and often include the following details:
- Offer of Purchase Price
- Amount of Financing (and whether or not the purchase will be contingent upon financing)
- Cash in Banks: Approximate amount in all accounts
- Liquid Assets: Includes stocks, investments etc., i.e., anything that can be liquidated within 3 months
- Non-liquid Assets
- Closing Date
Remember, whether you are purchasing a co-op or a condo, always consult a real estate attorney before signing a contract.
As a general note, it is often easier for international buyers to purchase a condo because of the stringent requirements of most co-op boards. This depends on the individual building and we will advise accordingly.
We know that the New York City purchase process can seem overwhelming, but we will use all of our efforts, insights and experience to make it as easy and stress-free as possible. Once you move in, co-ops can be great places to live and make your home.
We look forward to answering any questions you may have as they come up, and to assisting you in your NYC real estate search.