Look Before Leaping Off the Cliff

1. Capital plan for the building

2. Capital improvements (past history and future plans including cost estimates and time frame)

3. Mortgage for the building (what are the terms/conditions/renewal options)

4. Management agreement (company currently holding management contract; costs/services)

5. Asbestos survey on public and apartment spaces

6. Rotting window frames on basement and other public spaces that may be entry point for rodents/bugs and water damage

7. Water/electric meters. The costs for each year should be reviewed. Are the costs similar year to year?

Application Package. Heads UP (Way UP)

There are three terms every potential co-op buyer must memorize: down payment, debt-to-income ratio and post-closing liquidity.

• Hurdle One: The down payment is the initial cash portion the buyer pays the seller with the remaining amount to be financed by a bank or other lender. Co-ops want owners to have equity in their homes. A down payment can run from 20-50 percent (not universal). A few high-status buildings may insist on all-cash purchases with no financing allowed.

• Hurdle Two: Debt-to-income ratio. The amount of a buyer’s monthly debt divided by his/her monthly income. For many co-ops the permissible debt to income ratio tops out at 25-30 percent. Many boards also look at the overall financial picture. If someone is on Social Security and brings in only $2100 per month, but has a $10 million in the bank or investments, the debt-to-income ratio might not be an issue.

• Hurdle Three. Post-closing liquidity. The amount of money readily available to the prospective buyer after making a down payment. This can include cash in the bank, money-market and/or stock funds, stock portfolio, Treasury bills, certificates of deposit (considered liquid). IRAs and other retirement accounts are not considered liquid, nor are life insurance policies, uninvested shares of stock or personal property (i.e., real estate, works of art).

The rule of thumb – buyer should have enough cash on hand to pay the mortgage and maintenance for two years in case his/her income ends for some reason, such as job layoff or illness.

Boards will sometimes settle for one year liquidity and one year of cash placed in escrow which allows a prospective buyer to raise escrow cash by selling liquid assets ahead of time and gives boards peace of mind.

Some boards will inform brokers and buyers about their numerical requirements up-front so as to avoid time and trouble of vetting people with little chance of acceptance. Other boards have no absolute requirements and make judgements on a case-by-case basis.

Risks vs. Rewards

CoOpLiving.Part5 .2 3 | eTurboNews | eTN — Jorge Royan – royan.com.ar

All purchases carry risk. In the case of buying a NYC co-op, many factors are not within the control of the buyer, including a poorly managed building, a lazy co-op board or untrained or inadequate building staff. Shareholders may have to deal with unexpected special assessments levied by the BOD for major building repairs that were unanticipated and maintenance payments may increase faster than inflation. The BOD may change the sublet or other policies, making apartment rental and/or pet ownership impossible. Selling your apartment may be a challenge due to arbitrary board rejections of prospective buyers because a member of the BOD holds a grudge against you.

اڳتي وڌڻ

You have found the apartment of your dreams. Your attorney, accountant, interior designer, architect and family are all on the same page. You and the owner have reached agreement on the sale price and now it is time to close.

Time to Close

Co-op closing time in NYC may takes 2-3 months from the time there is a signed purchase contract; however, in the REAL world the length of time it takes to close and depends on a number of factors and may be outside direct the direct control of the buyer:

1. All cash purchase buying a sponsor apartment. Plan on 2-3 months (or less) …but,

2. Buying from an estate with an inexperience attorney – delay

3. Co-op board package may be incomplete or contains errors – delay

4. Managing agent is slow in reviewing the application and postpones sending it to the board – delay

5. The co-op board is reviewing many sales and they are competing for BOD attention – delay

6. Board package submitted during a holiday period – delay

7. Interview scheduling conflicts (you and the BOD) – delay

8. BOD cannot make a decision – delay

9. Seller or buyer are uncooperative – delay

بند ڪرڻ جو خرچ

• وڪيل جي فيس. Range from $1,500-$4,000. Usually paid upon the closing of the transaction. There may be an additional fee for the bank’s attorney ($1,000).

• Mansion Tax. The threshold for the mansion tax in New York City is $1,000,000 (it is unlikely a mansion is selling at this price). Technically the tax is considered a transfer tax, paid by the buyer on properties equal to or larger than $1,000,000. The tax amount varies and is a graduating rate starting at 1 percent increasing based on ranges of purchase prices to a maximum of 3.9 percent for properties $25,000,000 or greater.

• عنوان انشورنس (Condos only). Purchasing a condo and getting a mortgage requires title insurance and typically runs 0.45 percent of the purchase price. It is acquired to protect buyers and lenders against claims of the title to the property prior to owning the home.

• Mortgage Recording Tax (Condos only). This requires purchasers to pay 1.8 percent on mortgage amounts under $5,000,000 and 1.925 percent on mortgage amounts above $500,000. This is the loan amount and not the purchase price. For an average apartment in Manhattan for $2,000,000 with 20 percent down, there is a 1.925 percent charge on the $1,600,000 loan amount of roughly $30,800 for the mortgage recording tax alone.

• Flip Tax (Co-ops). This is a transfer fee paid to the co-op during a co-op apartment sale transaction. The fee is not technically a tax and therefore not deductible as a property tax. The amount of the flip tax and who pays for it (buyer or seller) varies from co-op to co-op. The information is generally outlined in the buildings proprietary lease or co-op by laws.

• Additional fees. Mortgage fees, recoding expenses, incidentals, etc.

• New York State & NYC Transfer Taxes (New Development Condos Only). (prevu.com)

آخر ۾

When the deal is finally complete, the buyer gives the seller their money. The seller gives the buyer the deed (for condos) or the proprietary lease (for co-ops) and everyone moves on with their lives.