Calculating square feet should be a straightforward and easy calculation. However, in New York City’s co-ops and condos, the number you are given does not always reflect reality. Sometimes, seller’s agents or sponsors overestimate the size in an attempt to mislead buyers. Other times it an honest error, perhaps one that has gotten repeated through the years.
Given New York City’s high per square foot price, this is not a trivial matter. As with any significant investment, it is essential to thoroughly understand what you are receiving in exchange for your hard-earned money.
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Square Foot Discrepancies
There can be some reasons for different square footage calculations. Some brokers and sponsors include common spaces such as elevator shafts and hallway, and they can do so legally in some instances. Some errors are due to miscalculations, whether done intentionally or not. While the calculation is done with a laser, it is still subject to human error. An apartment with an odd layout adds to the challenge.
In any case, there are consequences, including your loan status and resale value, when there is a miscalculation.
The lenders weigh in
Your lender is going to do its calculation before extending you a loan. Its total may come in below the seller’s square footage claim. Whether your lender is underestimating the apartment’s size or the agent/sponsor is exaggerating the square footage, you have an issue.
This could delay your loan and closing, or even torpedo the whole deal. This can create a host of complications, including potentially losing your deposit, however.
In an extreme situation, you can sue, although this is usually an uphill battle. Many sellers’ brokers deny responsibility, and you need to prove fraud, which must include a misrepresentation of “material” facts, which is open to interpretation. A seller often claims he/she does not know the correct square footage.
There is typically limited oversight in these matters. A condo developer is required to disclose its square footage calculation in its offering plan, which is registered with New York State’s Office of the Attorney General, so at least you know what it is based on. However, this is not the case for co-ops.
Doing your homework
Some sellers’ agents do not include the square footage in the property’s description, or state it is only an approximation. In these cases, it is up to you to find out on your own by hiring an engineer or architect, if you are inclined. Given the price per square foot is one standard pricing mechanism, you might find this worthwhile.
If it is a new building, your lawyer should read the offering plan as part of his/her due diligence.
One way to measure the fairness of your offer is to break it down on a price per square foot basis. After all, this allows an apples-to-apples comparison. If the square footage is materially different, you may find that your offer is too high, although there are other factors, such as the building, neighborhood, view, and a host of other factors that come into play.