What are the most important questions to ask when buying a co-op apartment in New York
City?
Is there a checklist of common questions you should ask before submitting an offer?
We'll discuss the most important questions you should ask when buying a co-op in the
following video.
I'm Nick at Hauseit, visit our website www.hauseit.com to save money when buying or selling real
estate here in New York City.
So, let's get started.
What are the coop's financial requirements?
Co-op buildings in New York City have stricter financial requirements than mortgage lenders.
This means that you might not qualify for a co-op even if you have no issue obtaining
a loan from your bank.
Failure to meet a co-op's financial requirements typically results in an immediate co-op board
rejection, and this means your deal will be cancelled and you'll have to start all over
again.
A typical co-op building in New York City requires buyers to have a debt to income ratio
between 25% and 30%.
Now most coops in the city also require that applicants have at least 1 to 2 years worth
of maintenance and mortgage payments available in liquid assets after closing and after paying
your buyer closing costs.
In addition, most coops also have minimum down payment requirements which are typically around
20%, in some cases they can be 30% or more.
Co-ops also have various rules on gifting and proposed purchasing structures and uses
of the apartment such as guarantors, parents buying for children or pied-a-tierre usage.
How easy is it to sell apartments in the coop?
In addition to the co-op's financial requirements, the building may have other policies which
will make it more difficult for you to sell your apartment in the future.
For example, does your co-op building prohibit parents buying for children, co-purchasing,
pied-a-tiers or guarantors, how about gifting? The more restrictions your building has, the
fewer number of buyers will be able to market to when it comes time to sell.
Fewer buyers means less demand and perhaps the lower price.
Are open houses permitted?
Some coops and condos prohibit open houses which means that it will be incredibly difficult
for you to maximize foot traffic when selling your co-op.
Now before buying into this type of building, ask yourself do you want to live in a co-op
with strict rules based culture encourages neighbors or perhaps your own doorman to rat
on you for holding open houses in a good-faith effort to sell your own home? A very important
question to ask.
Have there been any co-op board rejections recently?
A building with a history of recurring board rejections is a serious red flag.
It may suggest that the co-op board is delusional, out of touch, overly strict or outright discriminatory.
So, before buying into a co-op you should make sure that there is a fluid history of
resells in the building.
Now here's a simple question: are the people at the front desk friendly checking the demeanor
of the doorman is another way to see how you may be treated in the future when it comes
time to sell.
Is the doorman rude to visitors or does he or she behaved in a pretentious manner?
If so, the doorman could be a reflection of the attitude of the residents and possibly
foreshadow how they may treat you or your future buyer during a co-op board interview.
Is there a co-op flip tax?
If so how much is it and is the buyer or seller responsible for paying it?
While not all coops in New York City charge sellers of flip tax, a common flip tax amount
is 1% to 3% of the sale price.
Flip taxes come in many shapes and sizes which include a percentage of the sale price, a
percentage of profits of per share amount or some combination of these methods.
A co-op may also change its flip tax from time to time by holding a shareholder vote.
What is the sublet policy?
Co-ops are less expensive than condos partly due to the fact that most coops have sublet
restrictions which deter investors from buying them.
A typical co-op sublet policy in New York City permits subletting 2 out of every 5 years
after you've lived in the apartment for say 1 or 2 years.
An example of an inflexible sublet policy would be if the building only permitted shareholders
to sublet for say up to 2 years or perhaps just one year during the lifetime of ownership.
Co-ops and some condos also charge monthly or annual sublet fees, so you'll want to make
sure your buildings fee structure is reasonable.
What is the 5-year monthly maintenance increase history?
Co-op buildings with a history of recurring and above average maintenance increase should
be avoided.
One great way to see how financially responsible a co-op has been is to have your buyer's agent
request the most recent five year history of monthly maintenance payments while not
all sellers will keep these records there's certainly no harm in asking.
First things first it's totally normal for a co-op to raise its maintenance every year
or two to keep up with inflation.
The reality is that the cost of salaries real estate taxes and other expenses increase naturally
over time as a result of inflation.
If a co-op raises its maintenance say 2-5% every few years this would appear to be completely
justifiable but if a building consistently raises its maintenance by more than say 5%
a year this may suggest that the coop has financial or other managerial issues.
If you plan on buying into a building with a consistent history of above-average monthly
maintenance increases you should make sure that your valuation of the unit is adjusted
to reflect the higher than average carrying costs.
What capital improvement projects are on the horizon?
All co-op and condo buildings in New York City occasionally require costly capital improvement
projects in order to maintain the most expensive elements of the building.
These may include elevators, roof facade and the heating systems such as boilers.
If you are buying into a self-managed building or into a co-op with a small number of apartments
finding out the condition of these items is especially important since there are fewer
shareholders to split up the cost of future repairs.
If your co-op has an elevator but only 10 apartments it means that the cost of the elevator
replacement or facade work will be divided by just 10 people.
Before buying a co-op it's a good idea to find out if there are any current or anticipated
special assessments to pay for building maintenance or capital improvements.
Are in-unit washer/dryers permitted? it's not always guaranteed that your co-op building
will permit the installation of washer/dryer units in individual apartments.
While the majority of coops have laundry rooms most older buildings do not permit apartment
owners to have their own units since it may place too much strain on the building's aging
plumbing systems.
If having an in-unit washer/dryer is a must your buyer's agent should request the house
rules or other specific documentation which confirms that in-unit washer/dryers are permitted.
Your attorney will also corroborate this during buyer due diligence which will occur prior
to the signing of a purchase contract.
In some cases an individual apartment may have a grandfathered washer/dryer in the unit
even though the co-op building no longer permits new washer dryers to be installed.
Buying a unit with a grandfathered washer/dryer usually means that you are permitted to keep
them or in the future replace them as necessary if they break.
So we hope you found this video helpful.
I'm Nick at Hauseit, check out our website www.hauseit.com to learn about ways to save
money when buying or selling real estate here in New York City and if you liked this video
do us a favor hit like, subscribe, leave us a comment.
We greatly appreciate it and we hope to see you on the next video.