The NYC Co-op
Updated: Apr 12, 2021
I bet half the people who live in NYC are still baffled by "the co-op", even though the majority of residential buildings here are cooperatives. So what is a co-op apartment and why do they exist? I'll tell you all you need to know, and some stuff you don't but should, living in NYC!
34 Gramercy Park North
The Fun Stuff:
The cooperative living structure came over from Europe, popular in Edinburgh and Vienna long before New York. The first one here was at 34 Gramercy Park North, built in 1883. (Fun fact-- Jimmy Fallon actually lives in this building now: I once met his dog in the lobby on an apartment showing.) It then became one of a handful of co-ops that were for the super wealthy. This did not lead to a big wave of co-op development though. It wasn't until the 20th century that an ARTIST, fed up with renting, revived the co-op. See, not just for the elite! Landscape painter, Henry Ward Ranger, fed up with having to rent a studio for work and a home to live, drew up his own plans for a co-op housing building where he could have an apartment and an adjacent studio. He and architect William J. Taylor developed West 67th Street Studios (still standing today), and Taylor went on to oversee the construction of many co-ops to come. This is when the co-op trend in NYC took off.
What you need to know:
Co-ops make up about 75% of the housing stock in New York City. When buying in a co-op building, you buy shares in a corporation, instead of owning the actual space. Usually the bigger the apartment, the more shares you get. The corporations are run by elected officials: the infamous Co-op Board. It is their responsibility to "run" the corporation. They make overall decisions for the building, including who gets to live there. There is a monthly "maintenance fee" living in a co-op, which covers all fees to keep the building in operation, including property tax. The other type of apartment in New York is the condo, which functions as you expect: you buy the actual space and receive a deed, there is no corporation involved, there is no interview and board to pass to reside in the building (for the most part, there are some odd condo building exceptions), and you pay your own property taxes because you own actual property.
West 67th Street Studios
Advantages of a Co-op
They're cheaper than condos, so you can also get more space for your money.
Closing costs are more affordable. Since you aren't buying real property there are less fees involved.
There are more to choose from.
They usually function more like a community. Since there is a vetting process, and you are accepted into the group, you aren't just a nameless resident. People know you.
If you don't like something about the building, you can bring it up with the board. Noisy neighbor? In a condo, you either take it up with that person directly or call the police. But in a co-op, you can ask the board to get involved and they could face a fine if things don't change.
Disadvantages of a Co-op:
A larger minimum downpayment is required. Often condos allow as much as 90% financing. Most co-ops allow 80% financing, but it is not uncommon for that number to be less. It is a private corporation, so each building can make up their own rules. The Hampshire House on CPS does not allow financing at all.
They take longer to close. After contracts are signed, the buyer's side has about 10 business days to submit their purchase package to the board. then the board can take up to a month to send word if the buyer has made it to the interview. Scheduling the interview can take a week or two as well. Though that has become easier with zoom meetings possible.
They want to know everything about you. The package you submit must include ALL financial records and a number of recommendation letters. There are really no restrictions on what they can ask. I have had one board ask about the personalities and livelihoods of my buyers' grown children, worried that they may use the apartment and be disruptive. Some want to meet your pet at the interview as well. There are a lot of hoops to jump through, to say the least.
They have more requirements. Many want liquid assets equaling 1-2 years of mortgage and maintenance post closing and a debt to income ratio of anywhere between 15-30% . These rules are different in each building and are adopted to feel certain you will be able to pay your bills regardless of unforeseen hardships, like, oh, a pandemic.
They have more restrictions. Many don't allow subletting or pied-a-terres. Some don't allow gifting or co-purchasing (when a relative helps you purchase your apartment). Some don't allow pets. It's super important to know all the rules before you sign contracts.
And that's a co-op! Want one? Ohh, just threw a lot at you at once. Don't panic. You don't need to understand everything to know if a co-op is right for you. Know YOUR must-haves. Do you need to be able to sublet? Do you need pet-friendly? Do you only have 6 months of post-closing liquidity and need a building that will be ok with that? Make sure your agent knows your must-haves, then look at both co-ops and condos that fit them. As a real estate agent, I find that if you can fit a co-op, buyers usually end up purchasing one. Co-ops have gotten a bad rep as of late, for the extensive process and people being in your business. But when it comes down to it, you get more space for your money, as evidenced by the graph up top showing much lower prices for co-ops than condos in the last quarter of 2020. That's usually the top must-have, right? So let your agent get you through the annoying process (which is really only maybe two months out of your life) and then enjoy your amazing new home for years to come.
Need help navigating the co-op process? Reach out! Happy home hunting, NYC!