Central Park resevoir - sales guide

Sales Guide

Co-operatives | Condominiums | Townhouses

The Purchase Process | The Sale Process | Closing Costs


Co-operatives (co-ops) are the most common form of homeownership in New York City. In general, co-ops offer the highest quality of life and they make for an excellent primary residence as a result. They are also the most affordable type of homeownership thanks to supply and demand.

Co-op buyers are not actually buying property, like a house or condominium. They are buying shares in a corporation that owns a building. These shares allow them to use an apartment in that building subject to the co-op’s rules. When searching online for co-ops, keep in mind that real estate taxes are included in the monthly maintenance fee. Real estate taxes are listed separately for other types of property.

Some of the benefits unique to co-ops include:

  1. Lower closing costs
    • Co-op buyers do not pay the mortgage recording tax or title insurance in New York, saving as much as 3% of the purchase price compared to condo buyers.
  2. Higher quality of life
    • Nearly all co-ops have restrictions on rentals. This protects residents from having a revolving door of tenants for neighbors.
  3. Pre-wars (Buildings built before ~1940)
    • Pre-war buildings feature unique architectural details. Pre-wars are almost always co-ops.
  4. Location, location, location!
    • Buildings in the best of the best locations (think Fifth Avenue along Central Park) are usually co-ops.
  5. Community
    • Many co-ops want residents who will fit in with the rest of the building. Co-ops that are less strict might not have this benefit.

Also important to note:

  1. Financing
    • Most co-ops allow a maximum of 80% financing.
    • For reference: most condos allow 90% financing.
  2. Post-closing liquidity
    • Co-ops want buyers that have a minimum amount of liquid assets after the closing.
    • The standard is 2 years of debt service (mortgage + maintenance + other debt).
  3. Debt-to-income ratio
    • Many co-ops also have debt-to-income requirements.
    • The standard is no more than 25% debt compared to income.
  4. Board interview
    • Buyers must pass an interview with the co-op’s board of directors.
    • If the buyers do not pass, then the sale is canceled and their down payment is returned.
    • This is not as scary as it sounds. Your broker will guide you.
  5. Every co-op is different
    • This is a general guide. There are exceptions to everything.
    • i.e. Some co-ops allow investors, some allow less financing, etc.

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Condominiums (condos) will sound familiar to most buyers. When you buy a condo, you are buying real property. You can use your condo as a second home. You can also sell or lease it to anyone. On average, condos appreciate in value more quickly than co-ops. Hopefully, you can see why investors prefer condos.

Most condos have a Board of Directors. However, condo boards have limited power compared to co-op boards. When searching for condos online, keep in mind that real estate taxes are listed separately from the monthly common charges.

Some of the benefits unique to condos include:

  1. Lease-ability
    • Condos allow owners to rent out their homes.
    • Some buildings may require a minimum lease length of up to 1 year.
  2. Appreciation
    • On average, condos appreciate in value more quickly than co-ops.
  3. Easy to buy & sell
    • Condo applications are less thorough than co-ops. No interview, either.
  4. Flexible financing options
    • Most condos allow a maximum of 90% financing.
    • For reference: most co-ops allow 80% financing.
  5. Services & amenities
    • On average, condos have the best amenities.

Also important to note:

  1. Highest price per square foot
    • Condos trade at a higher price per square foot than co-ops and townhouses of similar size and quality.
  2. Up-and-coming location
    • Condos are usually new buildings in up-and-coming locations.
  3. Few pre-war options
    • Expect to pay a premium for a pre-war condo. Most pre-war buildings are co-ops.

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Townhouses can be found as single-family homes or as multi-family buildings. Fewer than 2,000 single-family homes remain in prime Manhattan. In Brooklyn, single-family townhouses are more common than Manhattan, but still reserved for the top buyers in the market.

Nearly all townhouses in our service areas are independently maintained by the owners. This means that they do not belong to a homeowner’s association. Buyers who desire the space and privacy of a townhouse, but who still want the services of a condo or co-op, can find a townhouse-like maisonette. A maisonette is a condo or co-op apartment with a private street entrance along with access to the building’s amenities and services.

Among the benefits of townhouses are:

  1. Privacy
    • No one enters your building except you. No doormen, security cameras, or building staff watching your every move.
  2. Outdoor space
    • Nearly all townhouses and many maisonettes come with a private garden or deck.
  3. Full control
    • Do whatever you want with your property. No board approval necessary.
  4. Location, location, location!
    • Single-family homes can be found in the most popular neighborhoods. True for both Manhattan and Brooklyn.
  5. Income potential
    • Some multi-family townhouses have an “owner’s unit” along with one or two rental apartments. More common in Brooklyn and Upper Manhattan.

Also important to note:

  1. Building width
    • Homes 25′ wide and larger are considered mansions. 20′ wide is standard.
  2. Maintenance
    • Expect a townhouse to require more maintenance than a condo or co-op.

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The Purchase Process

Have you decided to start your search? Before you do, make sure to have these three things:

  1. Your broker
    • This is your real estate quarterback. Don’t start your search without one.
  2. Your attorney
    • An attorney is required to negotiate real estate contracts in New York.
  3. Your lender
    • If financing, make sure to get pre-approved before starting your search.

Here are the steps that you can expect to take when purchasing a co-op or condo:

  1. Make an offer
    • Expect to include your pre-approval letter (if financing) and financial details when making an offer.
    • Offers are not binding in New York. You can back out at any time before signing the contract.
  2. Negotiate a price
    • You may receive a counter-offer to your initial offer. Continue making counter-offers until one is accepted.
  3. Draft & negotiate the contract
    • Once an offer is accepted, your attorney and the seller’s attorney will start working on a contract.
  4. Sign on the dotted line
    • Expect to make an escrow deposit when signing the contract.
    • 10% of the purchase price is a standard deposit. Developers may want more.
  5. Complete the loan application (if financing)
    • Continue working with your lender on the loan application once the contract is signed.
  6. Submit your purchase application or board package (Condos/Co-ops only)
    • Some are more involved than others.
  7. Meet with the board of directors (Co-ops only)
    • Treat it like a job interview and act professional.
  8. Closing time
    • Condos will issue a waiver of first refusal. Co-op boards will let you know if you passed the interview. Townhouses just close.

For condo buyers, expect this process to take 60 to 75 days with financing or 30 to 45 days without. Co-op buyers should allow additional time for the board interview and expect 75 to 90 days with financing or 60 days without. Townhouse buyers can close immediately if not financing.

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The Sale Process

Preparation is key if you want to earn top dollar. Before you get started, make sure to do these five things:

  1. Speak to your accountant and your attorney about the sale
  2. Show your home at its best
    • Fresh paint, new lightbulbs, refinished floors, etc. come at a small cost to you but have a major effect on your final sales price.
    • Wash all of your windows to maximize light and views.
    • Consider updating kitchen appliances before listing your home.
    • Professional home staging is highly recommended. Talk to your broker for details.
  3. Schedule professional photography and floor plan design
    • Make sure to take care of step 2 before taking pictures!
  4. Set your expectations for today’s market, not the market from 6 months ago
    • Deals that closed today were made months ago when the contract was signed. Keep this in mind when setting a price.
  5. Notify your building’s management and/or your co-op board about the sale
    • Every building has its own process. Management companies have their own too.

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Closing Costs

  • Buyer’s attorney fees: $1,800 to $3,000
  • Bank fees (includes application fee, processing fee, appraisal fees, etc.): Varies. Please consult with your lender.
    • Bank attorney: $600 to $1,000
    • Recognition agreement fee (related to mortgage): $200+
    • UCC-1 Filing Fee: $75 to $125
  • Co-op purchase application fee: $500 to $1,000
  • Move-in deposit (refundable after move-in): $500 to $1,000
  • Move-in fee (non-refundable): $250 to $1,000
  • Judgment & lien search: $250 to $350
  • Mansion tax: 1% of purchase price, only if purchase price is $1,000,000 or greater
  • Maintenance adjustment: Pro-rated maintenance fee for the month of closing.
  • Buyer’s attorney fees: $1,800 to $3,000
  • Bank fees (includes application fee, processing fee, appraisal fees, etc.): Varies. Please consult with your lender.
    • Bank attorney: $600 to $1,000
    • UCC-1 Filing Fee: $75 to $125
    • Mortgage title insurance: Varies by loan amount.
    • Mortgage recording tax (NYC): See below for NYC rates. Different rates apply elsewhere.
      • .80% of loan amount, if loan amount is less than $500,000
      • 1.95% of loan amount, if loan amount is $500,000 or greater
      • 2.80% of loan amount, if purchasing multiple units in the same building and loan is $500,000 or greater
  • Title insurance: About 0.4% of purchase price, plus various search and recording fees totaling ~$1,000
  • Condo purchase application fee: $500 to $1,000
  • Mansion tax: 1% of purchase price, only if purchase price is $1,000,000 or greater
  • Real estate tax & common charges adjustment: Pro-rated for the month of closing.
  • Sponsor’s attorney fees: $2,000 to $3,000
  • Sponsor’s New York City & New York State transfer taxes: 1.825% of purchase price
    • Calculated and added to the purchase price (for tax reasons). New price may trigger the mansion tax.
  • Contribution to resident manager’s (superintendent’s) apartment: Varies. Usually scales with the size of the unit purchased.
  • Capital fund contribution: One-time fee usually equal to 1 or 2 month’s common charges.
  • Mortgage recording tax (Suffolk & Nassau Counties): Disregard NYC rates from above.
    • 0.8% of loan amount, if residential 1-3 Family Dwelling
    • 1.05% of loan amount, if more than three family residential dwelling, commercial property, or vacant land
  • Peconic Bay Tax (Hamptons): Applies only to the townships of Southampton, East Hampton, Riverhead, Southold, and Shelter Island.
    • 3.40% of purchase price, if 1-3 Family Dwelling with purchase price greater than $1,000,000;
    • Does not apply if purchase price is less than $250,000 on improved property;
    • Does not apply if purchase price is less than $100,000 on unimproved property;
    • 2.40% of purchase price, if 1-3 Family Dwelling less than $1,000,000 or any other residential property not mentioned here
  • Broker’s commission: 6% of sales price
  • Seller’s attorney fees: $1,800 to $3,000
  • New York City Real Property Transfer Tax – residential: Varies. See below for rates.
    • 1% of sales price, when sales price is less than $500,000
    • 1.425% of sales price, when sales price is $500,000 or greater
  • New York City Real Property Transfer Tax – commercial: Used when selling two or more units in the same co-op or condo. Can apply to a combination apartment if units are not legally combined. See below.
    • 1.425% of sales price, when sales price is less than $500,000
    • 2.625% of sales price, when sales price is $500,000 or greater
  • New York State transfer tax: $4 per $1,000 of sales price (roughly 0.4% of sales price)
  • Transfer tax filing fee: $100 for co-op sales, $75 for condo sales
  • New York State estimated capital gains tax: 8.97% of estimated net gain, paid at closing UNLESS exempt; Speak to your accountant for details.
  • Federal Capital Gains tax (Domestic only): 15% or 20% of estimated net gain, paid at closing UNLESS exempt; Speak to your accountant for details.
  • FIRPTA Withholding Tax (Foreigners only): 15% of sales price is withheld from foreign sellers UNLESS exempt; Speak to your accountant for details.
  • Pick-up/Pay-off fee: $250 to $500
  • UCC-3 Filing Fee: $75 to $125
  • Building transfer fee (“flip tax”): Varies. Not all buildings have this.
  • Stock transfer tax: $0.05 per share
  • Transfer agent / co-op attorney fee: $500 to $1,000
  • Application / waiver fees: $500 to $1,000

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Tawil & Team

This information is provided for your convenience. Tawil & Team does not offer tax or legal advice. Please speak to your accountant for tax advice and your attorney for legal advice.