A buyer in New York has three fundamental choices. Whether he/she should buy property in: a condominium building, a cooperative building or a townhouse/brownstone. There are advantages and disadvantages to each and the choice is always a matter of individual preference. We asked our experienced staff to come up with the list of pros and cons about each one. Here is what they had to say.
Condominiums
In a condominium, a purchaser owns the apartment plus a percentage of the common areas of the building. The purchaser takes title by deed, which is recorded in the county clerk's office. If you intend to obtain a loan to purchase the apartment, you will sign a mortgage, which will be recorded in the county clerk's office. In a condominium there is an association that you belong to once you purchase the apartment. The association provides services such as general maintenance to the common areas in exchange for a monthly fee. Because it is real property you will pay your property taxes separately or inclusive with your mortgage payments. Generally your lender will assist you in this area. Because a condo is real property the closing costs are higher than those of co-ops. Whether you own a co-op, or a condo, you may have to pay assessments for any major repairs or renovations.
- Pros
- Easier approval process
- Own actual real estate giving you more rights to it, i.e. you can transfer deed to family members
- More control over building maintenance and development issues
- Lower monthly common charges
- Cons
- Typically higher purchasing price on per sq. ft. basis
- More legal responsibilities for the entire living facility
Co-ops
Co-ops and condos may seem similar at first glance, but there are some fundamental differences. A housing cooperative–or co-op association–is a legal corporation made up of shareholders that owns a residential building. Membership in the corporation is granted when you purchase a share in the cooperative by buying a unit. Rather than owning your unit the way you would a condominium, you are, in a way, becoming a tenant. Property taxes are included in monthly fees, a portion of which are tax-deductible.
Members screen and select new residents via their elected representatives (the co-op board). You may be familiar with many of the better-known differences between condos and co-ops: The building's approval process, financial requirements and rules are usually more stringent in a co-op, but co-ops generally cost less to purchase.
Co-ops comprise a much larger percentage of the city's owned housing units–about 75 percent, though this number is falling as many new condos and virtually no new co-ops are being constructed. Co-ops have a history of being the upper-echelon choice in highly-sought-after Manhattan neighborhoods like the Upper East Side and Upper West Side. If you're looking for elegant old-world architectural details, know that many of the city's classic pre-war buildings are co-ops–and rare condo conversions of pre-war apartment buildings tend to be very expensive.
Whether a co-op would suit your needs depends on what you're looking for in an apartment. If you're seeking a space with pre-war details in one of the city's pricier neighborhoods, a co-op is where you'll find it. If you're looking for a place to call home and put down roots, or If it's important that the building be intimate and that your neighbors care about their surroundings, it may be more likely that you'll find like-minded neighbors in a co-op. If you're a foreign buyer, hope to buy with a very low down payment, plan to use the unit as a pied-a-terre or rental investment or hope to sell at a profit within a short time, you may find yourself frustrated in the co-op market.
- Pros
- Co-ops are usually cheaper to purchase than condos (about 9 percent less expensive after factoring in size differences).
- There are more of them: Co-ops make up a much larger percentage of the city's owned housing units (around 75 percent).
- There are many more pre-war co-ops available than condos.
- Co-ops have slightly lower closing costs; title insurance isn't needed and and there is no mortgage recording tax.
- A thorough vetting process and stricter financial requirements mean more financial stability, especially in market downturns.
- The vetting process and restrictions mean more owner-occupied units and less turnover, which can prevent problems like a revolving cast of renters, illegal Airbnb use and other potential disruptions.
- A portion of monthly maintenance fees are tax deductible.
- Co-op shareholders are also considered tenants of the co-op, which gives them legal protections under New York City landlord-tenant law.
- Cons
- The approval process and building rules are usually stricter in a co-op, and potential buyers can be rejected without having to provide a reason; condo boards can't legally reject potential buyers.
- Co-ops generally require buyers to make a down payment of at least 20 percent of the purchase price, sometimes as much as 50 percent or more; some exclusive buildings don't allow financing at all. Co-ops also have liquid asset requirements and may ask buyers to meet a debt-to-income ratio and have an excellent credit score.
- Stricter financial requirements mean you'll be asked to share more personal financial information.
- Limits on subletting, purchasing for others and pieds-a-terre mean co-ops are not a good choice for investment buyers who don't plan to live in the building or who are looking for short term ownership.
- Monthly maintenance fees are generally higher for co-ops than for condos, as a share of the property tax and possibly payment toward an underlying mortgage are included.
- The purchasing process generally takes longer.
- Most new developments (1980s and later) are condos; if new is what you're looking for, you'll likely have to go condo.
- Co-ops are more more difficult for foreign buyers to purchase as they often don't have the necessary records from a U.S. bank, and co-ops do not to allow anonymous purchasing by LLCs.
Townhouses and Brownstone
Townhouses and brownstones are freestanding 2-5 story buildings often constructed before the war. Brownstones are more elegant, featuring elaborate decorative facades and many other architectural details inside. Townhouses tend to be plainer with somewhat smaller living spaces (although be careful as the terms are often used interchangeably). These types of buildings are traditionally occupied by families or well-established individuals who prefer the more private and comfortable living environment. The actual buildings can vary from narrow and low-rise two unit row houses to large and elaborate brownstones that if not divided into units can have a living area of up to 10,000 sq. ft. Similarly the prices of these types of buildings differ dramatically depending on location, size, condition as well as their legal status.
- Pros
- Comfort and privacy of your own home
- No approval process
- Larger living spaces / usually multi-level
- Total control over maintenance and improvement issues
- Easier to re-sell or transfer deeds than condos or co-ops
- Cons
- Significantly higher purchasing price on per sq. ft. basis
- More legal and financial responsibilities and obligations i.e: zoning codes, taxes, higher mortgages
- Maintenance related issues
