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Considerations When Buying a Condo in NYC

This information will help you decide if the condo unit is right for you. It will also give you some insight into the condo board’s cooperation, organization, and helpfulness.

Estimated time to close a Condo purchase 1-2 months.

Instead of owning shares in the cooperative, when people buy a condo, they purchase real property. They receive a deed, and they pay taxes and ownership fees. They also have the right to sublet if they choose or sell the property according to their desires.

As more new buildings are built in New York, condos are fast gaining market share and popularity. It is not surprising considering the ease of buying a condo vs. co-op. As opposed to a coop, a condo apartment is “real” property. A buyer receives a property title (deed) as though they were buying a house on an individual plot. In addition, each. Each apartment in a condominium gets a single tax bill.

Block and Lot

In Manhattan, each condo unit in a multi-dwelling building has its block number and tax lot. Those parts of the building that are not part of your particular condo apartment are called common elements. These include the outdoor areas, and the building is on and inside areas like the lobby, hallways, and utility and laundry rooms. When you own a condo, you also own a specified percentage of these common elements.

Accordingly, the whole building is collectively owned by the unit owners. Each unit owner pays a standard maintenance fee called common charges. These go to the operating expenses for the building and; paid each. In addition, however, each unit owner is required to pay their real estate taxes. 

Monthly Common Charges

There is also still a standard monthly common charge similar to the maintenance charges in a co-op. However, these. These charges don’t include your real estate taxes and are not tax-deductible.

The straightforward nature of buying a condo, coupled with the fact that in some cases, you can finance up to 90% of the purchase price and sublet them at will, makes condominiums the number one choice for flexibility. They also tend to be lower than in co-ops because there is no underlying mortgage for a condominium building. Young buyers, International investors, and buyers that choose to use creative financing are urged to consider condos.

Freehold

In a co-op, owners only own their unit and common grounds until they decide to move, at which point ownership transfers back to the corporation. They cannot transfer title or ownership at any point and, in reality, never indeed own anything. Condominiums are a different story. When buyers purchase a condo, they receive a deed and yearly taxes, and other ownership fees. They can sublet their condo or sell it outright if they so choose.

Key Condo Factors

• Financing Options: Although condos allow for 90% financing, most banks in today’s market require 20% down.
• The Application Process: The acceptance ratio for condominiums is much higher than for a co-op, and no board interview is required.
• Common Charges: There are often standard charges for the services, amenities as well as upkeep.
• Property Taxes: Must pay real estate taxes, which can be deductible in many cases if those deductions are carefully itemized.

Advantages of Condo

• Higher visibility and availability for buyers locally and internationally.
• Flexible financing options, most condo buyers can finance up to 90% of the condo’s selling price.
• The more natural application process with higher acceptance ratios
• Lower common charges usually
• Condos have flexible sublet policies

Disadvantages of Condo

• Closing Costs are higher for Condos
• Flexible financing and purchasing processes can attract less qualified buyers and investors who could be forced to sell at a lower price during distress.
• Flexible sublet policies can attract more renters that could cause more significant wear and tear on the building.
• A disadvantage of purchasing a condo is the higher overall cost since there aren’t nearly as many condos. However, this is changing quickly as new condo developments pop up all over the New York area.

New York City Condo Purchasing Process

Crucial steps you’ll take in purchasing a New York City Condo.

Mortgage Pre-Approval

• Estimated time frame: 1 – 3 days

It’s essential to understand how much you can afford to spend. Condo apartments typically require at least 10% down. Down payments can vary from building to building, with some allowing for as little as 5%. Despite many condos accepting 10%, most banks in today’s market require 20% down. If purchasing a condo in a new development, the down payment could also vary.

Submit a mortgage preapproval application with several lenders. Most sellers will not take an offer seriously unless you’ve, been pre-approved and by submitting mortgage applications to multiple lenders, you’ll have more choice in which one you choose. Knowing your preapproved rate will also let you know what your budget is. While it may be tempting to go for a property that matches the maximum preapproved rate, it’s better not to. The price may rise later in negotiations, so it’s better to give yourself a little breathing room.

Finding a Condo

• Approximate time frame 1-6 months

Depending on what you are looking for, the length of your search will vary. The average buyer sees 15-20 apartments before deciding on one. Our buyer’s agent will work closely with you to find out your priorities in finding a home. It’s sporadic to find a home that ticks all the boxes to make a list of those things you need and not so much. Our agents will then find condos that match your criteria and arrange for a private viewing.

Negotiation

• Approximate time three days to 3 weeks

The fair market value of a condo on the current market. The critical thing to keep in mind is that everything is negotiable. At Elika, we use a 4-6 data point analysis to estimate the approximate value. Our detailed report brings meaning to the numbers and helps you submit the right offer and start negotiations off on the right foot. With our agents’ advice and negotiating skills, you can expect to get your condo for a fair price. This stage can take a bit of time as offers and counteroffers go back and forth between both parties.

Contract Signing

• Approximate time frame 1-3 weeks

Once a price is accepted, it’s time to write up a contract of sale. The seller’s attorney will draw up the contract of sale for your attorney. The buyer’s attorney will then complete due diligence. Involves reviewing minutes, financial statements of the building and checking for any liens against the property. Upon review, the buyers sign the contract and forward it with a 10% deposit. The sellers will then execute the contract. Possible contingencies: Financing, Board Approval, closing dates. The quicker you can sign the contract, the better. It’s essential to keep in mind that in NYC, an agreement is only binding after both parties have signed.

Mortgage Application

• Approximate time frame 5 – 9 weeks

Since you’ve already been pre-approved for a mortgage, you can start the application process right away. However, you will need to submit far more documents this time, and the process can get frustrating if anything is missing. An Elika agent will help you navigate this part by ensuring everything is in order before submitting it. In addition, mortgage applications cannot be processed without an executed contract. If you need financing, you’ll need a commitment letter from a lender to proceed any further. These letters are, in most cases, the last items to complete a condo application.

Condominium Application or Board Package

• Approximate time frame 3 – 9 weeks

Condo resales require an application to be submitted and approved before a closing can take place. For the board to review a potential purchaser, Condo applications are given to prospective buyers to fill out after a contract has been countersigned. If there’s no financing, it generally takes about 2-3 weeks to gather the application’s information. When working with an Elika buyer’s agent, we assist in this process by making it as hassle-free as possible. Our agents have been through this process many times and may even have experience working with this particular board. If not, then they’ll make a few inquiries to find out more about their requirements.

Most Boards request the following information:

• Full financial disclosure with supporting documentation
• Employment history
• Current salary
• Personal and business references
• Tax returns for the previous two years
• Credit history

Submit Application for review

• Approximate time frame 1-4 weeks

After Elika completes your Board package, we’ll forward the finalized application to the condo building’s managing agent. The managing agent will then inspect the package to ensure it is complete. Your buyer’s agent will then forward the application package to the Board of Directors of the Condominium. After the board reviews the application, they will approve and issue a waiver to close. You’ll be glad to know that there’s no board interview with a condo purchase as there is with a co-op.

Schedule a Closing

• Approximate time frame 1-2 weeks

After board approval and once the waiver to close has been received from your lender, you can start scheduling a closing day. Your attorney will arrange this with the seller’s attorney to find a date that suits both parties. Before closing day (or on the same day), you’ll do a final walk-through of the condo to see that everything is as you last saw it. Then on closing day, you’ll meet with the seller’s attorney to finalize all documents and hand over any outstanding checks.

A representative from your lender will also be present. Unfortunately, both real estate agents are usually not present on the closing day as their job is finished. Instead, they’ll show up at another time to pick up their commission checks. Once all documents have been signed, you’ll receive your deed of ownership. Congratulations, you are now the proud owner of an NYC condo.

Questions to Ask Before Making an Offer on a Condo

Before you submit an offer on a condo apartment, you’ll want to get some essential information from the management company/board. So here are some crucial questions to ask, no matter where you’re trying to buy.

Unit Ownership Percentage: Primary User vs. Investors

What percentage of the units are owner-occupied, and what percentage is rented out to tenants? Generally, buildings with a higher rate of owner-occupants are more marketable when reselling the property.

Condo ByLaws

Ask for a copy of the house rules and by-laws. Then, if possible, review them with your buyer’s broker and attorney. Be aware of any grandfather clauses that govern the property. For example, you may find that residents who bought the property after a specific date can’t rent out their unit, while those who bought earlier can do so.

Building Financials

Ask for a copy of the building’s financials. For example, how much money does the association or board keep in reserve, and how is it invested?

Current or Future Assessments

Are assessments keeping pace with inflation? Is the board raising condo assessments each year to build reserves to fund future repairs? Compare building assessments to other condo developments and co-ops in the area to determine if they are reasonable.

Reason for Assessment

What is covered by the assessment? Maintenance of the common areas, recreational facilities, Local Law 11 building repointing, trash collection, and snow removal are everyday activities paid by condo associations and co-op boards. Be sure also to find out what is not covered.

Historical Frequency of Assessments

Were there any special assessments mandated in the past five years? How much was each owner’s share? Some building assessments are unavoidable, but frequent, costly assessments may be a red flag indicating a building in poor condition. Or it may be a sign of imprudent financial policies with the board itself.

Sales Turnover in Building

How many condo units have sold in the building in the past 12 months, and how often do they sell?

Law Suits

Is the board involved in any litigation? Lawsuits involving homeowners or developers can rapidly deplete association reserves.

Quality of Buildings Construction

Has the building’s developer worked on other projects? If a conversion from something else to a condo, ask for an engineer’s report. If the roof, windows, and bricks are in poor repair, they will affect the value of your housing investment and possibly your quality of life.