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  • Rebecca B. and Shawn F.

Condo Fundamentals

This fall we’ve been working on listings at 100 W. 93rd St., newly renovated units that are part of a condo conversion. Being New York real estate agents, we are asked quite often, “What the heck is the difference between a co-op and a condo?” Here’s one of the best (and shortest!) explanations we’ve come across, from the excellent website "When you buy a condominium, your apartment and a percentage of the common areas belong to you. When you buy a coop, you don’t actually “buy” your apartment; instead you are buying shares in a corporation that is your building. The size of your share depends on the size of your apartment; buying the shares allows you to occupy a unit in the co-op building. At the closing for a condo you’ll be given a deed; at the closing for a co-op you’ll get a proprietary lease." While co-ops still make up the majority of transactions in New York city, condo sales are prevalent and on the rise. Their popularity hinges on a number of factors: condos don’t require you to put together a lengthy board package (which depending on the building, can be a very intrusive process), there is no interview, subletting is often permitted right away, they are investor/gifting/pied-a-terre friendly, and the community is generally more conducive to privacy. As a result of these upsides, condos are generally more expensive than comparable co-ops. There is a downside though: Condo closing costs are higher than those for a co-op. There are actually two types of condo transactions, resale and new development/conversion. A resale is just what it sounds like: You’re purchasing the unit from the current owner. Apart from the normal vagaries all New York real estate transactions are subject to, a resale is pretty straightforward. Things get more complicated when buying in a new development or a condo conversion. Developments and conversions require various approvals from the NY State Attorney General’s office. The sponsor needs to have a certain percentage of units in contract, for primary-resident buyers, before the Attorney General declares the building "effective" and people can start closing. Buyers can wait a year or more to close, and there is no guarantee the building will become effective. So why buy from a sponsor at this early stage? The potential risk and uncertain time frame means more room for negotiation and bigger incentives offered by the sponsor. For instance, the sponsor might be willing to pay the transfer tax (1.825% for most properties in Manhattan), an added cost specific to conversions and new developments. So buying early in the development process can be a smart move, as the first units available tend to be priced to move. Keep in mind, most big incentives are only offered to those buying their primary residence, as these are the contracts the building needs to be effective. Though negotiation for any buyer, including investors, is more flexible the earlier the sponsor is with the project. As units are sold, common spaces are usually improved as well and risks diminish; sponsors try to steadily increase prices, say 10% every few months, as the building gets closer to being declared effective. If you can stand some uncertainty, getting in early can be a smart move. Now, if you’re a buyer who needs a home stat, as long as the building is already effective, the process is a relatively quick one, usually a month or more shorter than a co-op. An additional benefit—since the units are newly built or freshly renovated, they should be spic n’ span at walk through, with any issues fixed by the sponsor; resales are generally “as is.” So accepted offer to move-in day can be {a mere} two months. Just bring your toothbrush, as they say! Is a condo right for you? The answer usually comes down to a combination of personal preference and financial reality. Co-ops are less expensive, and tend to be in older, more traditional buildings. Condos are more expensive and tend towards the modern in terms of building aesthetics and design sensibility. But if the price works for you and the vibe is right, a condo can offer real advantages. We’ll be spending much of the time at 100 W. 93rd St. this fall and winter, so feel free to stop by and check them out!

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