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| 1. Do I really need a real estate attorney to do the closing on my apartment? |
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| You should always retain a real estate attorney who is licensed to practice in New York or New Jersey, as the case may be. You need an attorney who is experienced in cooperative and condominium laws so that he or she can thoroughly perform the due diligence review of the Board’s minutes and the financial statements of the last two years. Also, your attorney should review the Offering Plan and amendments which are filed with the Office of the Attorney General. (www.OAG.state.ny.us). These documents disclose status of the co-op or condo’s financial health. After the due diligence is performed, you may decide not to purchase the apartment. |
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| 2. We are looking to buy an apartment to as a pied -a-terre. Will this be a problem with the Board? |
| Many co-op Boards in Manhattan frown upon pied- a -terres. If that is your intent you are better advised to buy a condominium. |
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| 3. What is the right of first refusal? |
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| Most condominium Boards reserve the right of first refusal which allows them to prevent a sale. However, they must agree to purchase the same apartment at the same purchase price. It is rare for a Board to exercise this right but it does happen. If it happens, you will receive the return of your down payment as you would if a co-op Board had rejected your application. |
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| 4. Some classified ads in The New York Times Real Estate section state “no board approval necessary.” What does that mean? |
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| This means that you are purchasing an apartment from the original Sponsor or a holder of unsold shares. The advantage of this type of transaction is that you do not need Board approval as a condition for the purchase. It means a quicker closing and is advantageous for purchaser who is not a US citizen or has less-than stellar financials. The disadvantage is that these apartments are slightly more expensive than apartments that require Board approval. It also means that the Sponsor or holder of unsold shares often passes on to the purchaser certain closing costs which are usually paid by the Seller, such as transfer taxes and the flip tax. |
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| 5. I am purchasing an apartment in a building that is a “condop.” Should I be concerned? Am I buying a co-op or a condominium? |
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| No. You need not be concerned. A condop is a combination of two condominium units: one residential and one commercial. If you are purchasing a residential apartment, you are buying shares of the co-op corporation as evidenced by a stock certificate. However, the apartment corporation owns the entire residential unit. The commercial unit is usually comprised of stores or professional offices and is often retained by the Sponsor who leases out the stores or offices. If you are purchasing a commercial unit from the Sponsor, you are purchasing real property which is evidenced by a deed, as you would in any condominium purchase. The reason condops were created was to preserve the tax benefits to co-op apartment owners. Section 216 of the Internal Revenue Code provides that no more than 20% of the co-op corporation’s income can come from non-shareholder sources. If a building derives a large amount of income from its commercial space, it will create a condominium for the commercial space. |
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| 6. I found the perfect apartment. How long will it take to close? |
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| The time varies. If you are purchasing an apartment that does not require Board approval and you do not need financing you can close within two weeks of signing the contract. If you are obtaining financing but do not need Board approval, it may take three to four weeks from the time you sign the contract. If you are obtaining financing and require Board approval, it could take eight to twelve weeks to close. If you are buying new construction, it could take six months or longer to close. |
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| 6. What does FSBO mean? |
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| It is an acronym meaning “for sale by owner.” Many people try to sell their apartments without a broker to save on the broker’s commission which is usually 6%. Therefore, the price will be lower if the seller is cut out of the transaction. However, an experienced real estate broker can be helpful to the purchaser in putting together a good Board package. In the current real estate climate there are a lot of Board rejections so a good Board package can make the difference in getting a Board to accept a purchaser. |
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