New York real estate has constantly been stabilizing. It introduced the concepts of rent control, rent stabilization, home clubs, submitting, co-op buildings or apartments, etc. The word co-op is short for the co-operative. Co-ops are different from single-family-based homes and condominiums. Buying a co-op apartment is not equivalent to buying real property. This means you don’t own the physical place on the purchase of a co-op apartment. Buying a co-op apartment involves the purchase of shares of cooperation, and thus the buyer becomes a shareholder. And in resultant, cooperation provides you with the proprietary lease and turns the buyer into a tenant in the building. The number of shares you have in the cooperation depends upon the size of the apartment.
Every owner of the co-op is consented to own a specific apartment. This concept is called a proprietary lease for a particular apartment. To sum it up, you own the shares in the overall building, including the right to live in the apartment. Co-ops form 75% of the New York apartment buildings.
The process of buying a co-op in Queens
The procedure of buying a co-op in Queens can be grueling, considering the challenges involved. Co-op apartments and their boards have quite an intensive approval procedure with lots of paperwork involved with a lengthy board package and forms. The board approval time may also be long.
Numerous co-ops also limit the percentage of financing that a purchaser can receive. Therefore, you should be ready to make a down payment that can be at least 20-25% of the purchase price. Some co-ops can take down payments to the extreme and may set a limit of cash purchases only. And even with a lot of cash, you still require a favorable debt to income ratio because this is the procedure of the board to estimate your capacity and how you will make monthly payments.
What are co-op maintenance fees?
All shareholders have an interest in ensuring that their home is a decent place to live in. Well-maintained buildings can benefit from keeping the residents’ quality of life in check. A monthly maintenance fee is charged to each stakeholder to upkeep the quality of life. This fee covers the underlying property taxes and bills etc. The amount of payment of maintenance fees depends upon the shares owned by the shareholders. If your lease entitles you to more shares pays more fees, but the plus point is you also get priority in the decision-making process.
The advantages of buying a co-op apartment:
Co-op apartments are the most prevalent type of apartments in New York, particularly in Queens. Some of the advantages are:
Firstly, co-ops are 15 to 20% cheaper as compared to condominiums. Moreover, the costs are highly affordable as it is not a physical piece of property which means it does not impose the need for title insurance, taxes, and fees that are required in case of the purchase of a condo.
- Financially stable
The reason the application and approval process behind the co-op transaction is notorious is that they want to make sure that the persons willing to join the cooperation can withstand the financial burden. This all is done to assure financial security. This procedure makes the co-op buying decision very useful in the events of economic disruption.
- Co-ops are like a community
Co-ops may have a strict selection process, but as an owner, co-op is a lot peaceful, less impersonal, and is not filled with unspecified dwellers. You can experience the security perks as well as develop a friendly neighborhood.
Co-op offers you the leverages regarding any disputes. A noisy neighbor can be charged with a penalty for breaking the house rules. The rules assure peace, harmony, and civility of cooperative living. This translates that the co-ops are concerned about a stable and long-run cooperative establishment.
Things to consider while buying a co-op
Since the procedure of buying a co-op is relatively different from a traditional home or a condominium purchase, it is essential to take certain precautions while buying a co-op. Seek help from an agent Unfortunately, certain buyers do not consider assistance from a real estate agent or a broker. This may result in the possibility that the seller’s agent may try their best to find angles to deal in the best interest of his party.
So, it is in the buyer’s best interest to seek the assistance of a reputable real estate agent to meet the requirements of the co-op.
- Do not overrate your financial strength
Being financially strong is not sufficient for the mortgage pre-approval. A co-op board may require reassurance that you will be able to pay the monthly maintenance fee as well, in case your job conditions are worsened. The board may have stricter debt to income ratio requirements than your lender.
- Prepare for the board interview
Let the board ask the questions and direct the conversation as it is not your time to ask questions. Asking questions from the board may have a negative influence. It would be best to address your inquiries through your real estate agent or attorney. It is important to be yourself. You are going to potentially live in this community, so you want to start off on the right foot.
It is important to be prepared when you purchase a co-op. A co-op purchase closing may be prolonged and can consume a lot of time. Go over the details and follow the steps. Talk to your real estate agent as well as the attorney for the understanding of detailed information that a closing includes.
In the end. The decision to buy a co-op depends upon your goals. If you are planning to live at a place for a long time, you should definitely consider buying a co-op. They are a lot less expensive as compared to condominiums. Considering its strict financial requirements, buying a co-op building can also be complicated. Prepare your board package carefully and show yourself financially stable.
I'm Amanda and I love helping first time home buyers make their first home more affordable and I love helping sellers move up to their forever home. Let me know how I can help you make your real estate dreams come true.
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