sellers
Co-op Basics (Lofts & Apartments)
Of the vast majority of apartments for purchase in New York City, at least 80% are in cooperative buildings. Other areas like Queens, Brooklyn and Long Island also have cooperative apartments for purchase. One advantage of purchasing a cooperative unit versus a condominium unit is that the majority of the time, you’ll be able get more square-footage space for the price paid. After the purchase of a cooperative apartment or residential unit, you own shares within a Cooperative Housing Corporation and receive a proprietary lease, which gives you the right to lease space in the building.
Cooperative shareholders pay a monthly or quarterly maintenance fee, to cover the building expenses. The maintenance fee covers such items as:
a) mortgage and property taxes,
b) utilities,
c) master insurance policy – this may just cover damage to the building not what’s inside each residential unit (confirm with the association bylaws) and
d) staff salaries such as security.
Note: Portions of these maintenance fees are deductible due to the buildings underlying mortgage interest and the owner’s proportionate share of the buildings property taxes. Consult your C.P.A. to learn more about Federal tax deductions.
As a general rule, your total annual housing costs (mortgage interest, cooperative maintenance fees, secondary residences and any other mortgages which your name appears) shouldn't exceed 25-30% of your gross reported income. Your total debt shouldn't exceed 35-40%.
Prospective or potential purchasers/buyers need to prepare a detailed "Board Package" containing:
a) thorough application,
b) specific financial information with statements as back-up's,
c) personal and professional letters of recommendation,
d) a letter of employment stating job function/title, salary and length of employment and
e) mortgage information – if financing is involved. Note: Applicable processing fees need to be rendered before the Board of Directors will review the "Board Package"
After review (generally up to 30 days), the Board of Directors will determine if an applicant qualifies for an interview. All prospective purchases must interview with the Board of Directors and be approved before any sale can be completed.
Notes: A cooperative Board of Directors chooses prospective purchasers based on financial resources and background. They also have the power to determine the rules of the building and admission standards. Standards such as:
a) the amount of financing allowed,
b) pied a terre policy - part time or temporary residential use,
c) guarantors,
d) co-purchasing and
e) parents purchasing for their children, etc.
All standards should be verified with the building management company.
Subleasing a cooperative depends on each individual building sublet policy - generally this is restricted or limited. As with standards, the policy should be verified with the building management company.
The co-op board can reject an applicant without a specific reason.
Luxury Lofts and Apartments - Condominium Basics
Popular alternatives to cooperatives are condominiums since they have much less restrictions of ownership. In contrast to a cooperative, a condominium is considered "real" property. A purchaser receives/owns a deed – fee simple ownership, just as though he or she were purchasing a house. The purchaser then owns an undivided share (an interest) of common areas used by residents such as recreation areas and parking lots. Each individual apartment within a condominium is considered as separate entities and each individual owner is taxed separately – which is 100% tax deductible. Also a monthly or quarterly common charge fee is accessed for the building's operation – which are not tax deductible.
There are certain benefits or advantages in purchasing a condominium such as:
a) more flexibility to sublet,
b) less restricted building rules,
c) generally, they don't require a board review,
d) use of the space for business purposes,
e) less of a down payment – traditionally 10% and
f) your finances are less likely to be investigated or scrutinized.
A disadvantage in purchasing a condominium is that a residential unit usually costs more to purchase than cooperatives due to the fact of the limited number of residential units and purchase flexibility. Generally, the closing costs are also higher for condominium purchases but you have the ability to close the deal faster.
Luxury Lofts and Apartments - Cond-op Basics
Cond-op refers to a residential cooperative where the ground floor is generally used as commercial space – which is a condominium unit. Just this space is considered a condominium unit while rest of the building is a cooperative. Note: The cooperative cannot receive over a certain percentage of income benefit from this condominium unit space. (Please check into the 80/20 rule for Co-ops.)
Most cond-ops operate with less restrictive building rules similar to a condominium building – usually they don't require a board of directors review. As taxes are concerned, cond-ops are classified as cooperatives in that you receive and monthly or quarterly maintenance bill in which only portions are tax deductible.
Luxury Townhouse Basics
Similar to condominiums, you own real estate or "real property". The purchaser receives/owns a deed or title - fee simple ownership. The owner will receive an individual tax bill and is solely responsible for all costs of the upkeep of the home and land. (i.e. painting, roof repair, shoveling walks, trimming shrubs, etc.)
The Purchase
Step 1 in selling a Luxury Loft or Apartment or House
Before any advertising is started, you should conduct a "comparable sales" price research survey with similar types of residential units within and surrounding your area. Also, you should start researching certain websites (i.e. TLC.com, Hgtv.com) or any of the multiple cable networking channels for advice on how to create a visually pleasing space for the buyer's eye.
For Houses or townhouses:
You should have an inspector come to your home or townhouse to do a complete inspection to see if there are any areas that need fixing because the buyer will be performing their own inspection upon an accepted offer.
Step 2 in selling a Luxury Loft or Apartment or House
Upon review, the seller has three options:
a) accept the buyer's offer,
b) reject the buyer's offer or
c) make a counter-offer.
If the seller or buyer makes a counter-offer, a negotiation process will ensue concerning price, terms and closing date that will eventually lead to an agreement from both respected parties.
Contract Basics:
Contingent contracts: A contract in which the buyer will be able to receive his or her 10% earnest money deposit or contract deposit back, if he or she fails to obtain the appropriate mortgage financing after the contract is signed. Note: The buyer has usually within 30 to 45 days to obtain a mortgage commitment.
Non-contingent contracts: A contract in which the buyer will forfeit his or her earnest money deposit or contract deposit, if he or she fails to obtain a mortgage after the contract is signed. Note: As with contingent contracts, the buyer has usually within 30 to 45 days to obtain the appropriate mortgage commitment.
FACT: A Real Estate attorney is mandatory in all property transactions in New York. It's advisable that a buyer research and interview with several attorneys before a selection is made. The buyer's attorney should be well qualified in the residential area of the buyer's purchase and fully understand the complexity of his or her transaction.
Accepted offer to Contract Signing (1 - 3 weeks)
Once the seller accepts the buyer's offer, the seller's attorney proceeds in preparing a contract of sale. At that point, the buyer's attorney will begin to examine the buildings financials, the offering plan, the meeting minutes and "contract of sale". A "Due diligence" investigation is conducted.
Note: For houses and townhouses, the buyer should schedule a thorough inspection of the physical condition of the property- from roof to foundation. (Use a professional like Accurate Building Inspectors.)
Once the buyer's attorney concludes his or her "Due diligence", the buyer signs the "contract of sale". The buyer is then obligated upon signature, to pay a 10% contract deposit of the purchase price - this deposit can be as low as 5% in some instances. The contract and deposit is then forwarded to the seller to be counter signed. The deposit is to be held in the seller's attorneys escrow account until the official closing of the sale.
Note: Until both respective parties sign the "contract of sale", there's no official deal and the seller can still accept other prospective buyer's offers. Speed is of the essence.
Mortgage Financing (4 - 6 weeks)
Before financing is involved, the buyer needs to make an important decision by either choosing to locate a financial institution on his or her own or to research and hire a mortgage broker. Mortgage brokers are independent of financial institutions and typically will take the buyers credit report and loan application and shop it around to multiple financial institutions to find the buyer the best loan based on his or her needs.
Note: If the buyer chooses to locate a financial institution on his or her own, each financial institution requires its own loan application and processing fees.
The buyer should be aware that the loan application approval or refusal is generally the slowest part of the deal. Most financial institutions require several documents regarding loan applications such as tax returns, pay stubs, bank statements and other documents that show your income history and your ability to pay your bills. While reviewing the buyer's credentials, the financial institution will schedule an appraisal for the property. This appraisal will show their opinion of the market value of the property in which the prospective buyer wants to purchase. The seller must provide the appraiser the property floor plan, comparables of like property sold and a copy of the first two (2) pages of the "contract of sale"
Note: Before agreeing on a specific loan, the buyer should ask the financial institution to put forth in writing a cost estimate of fees in order to close on his or her loan.
Tip: To avoid the potential heartache in having your mortgage loan application denied after several weeks, buyers should get pre-approved for a mortgage before looking for a house or apartment.
Complete a Board Package (Co-op/Condo) Application (3 - 5 weeks)
The seller will provide the purchaser/buyer the cooperative or condominium "Board Package" paperwork and discuss the property requirements and regulations.
Note: Cooperatives and condominiums differ in their approval process - reference section, cooperative and condominiums basics. (see Co-op/Condo info)
Potential purchasers/buyers need to prepare and complete a detailed "Board Package" containing:
a) thorough application, b) specific financial information with statements as back-up's (i.e. bank statements, tax returns, W-2's),
c) personal and professional letters of recommendation,
d) a letter of employment stating job function/title, salary and length of employment and
e) mortgage information (i.e. loan application, commitment letter and *Aztec Recognition Agreement*) - if financing is involv
Note: An *Aztec Recognition Agreement* is only required in cooperative closings. The cooperative acknowledges the financial institution's interest by allowing the financial institution to be first in line if the buyer fails to uphold their agreement by defaulting on payments.
Submitting the Package (Co-op/Condo) (2 - 4 weeks)
Once the purchaser/buyer fully completes the Board Package application it should be forwarded to the Managing Agent of the respective property. The Managing Agent then reviews the Board Package application to make sure all information is complete and all relative documents are submitted. The Managing Agent will also perform all necessary background credit checks. The Board Package application should be very easy to read by providing a table of contents and section dividers.
Note: If all the relative documents and statements aren't provided, the Board Package application will be sent back to the purchaser/buyer delaying its approval.
Cooperatives: After the purchaser's/buyer's Board Package application is approved by the Managing Agent, the buyer then needs to be interviewed by the Board of Directors. If the buyer is approved, he or she is then allowed to set up a closing date with the respective seller. The closing usually takes place at the Managing Agent's office. As a reference, the minimum time to close with financing can take up to 90 or more days.
Condominiums: After the purchaser's/buyer's Board Package application is reviewed by the managing agent, it will be forwarded to the condominium board for approval. Generally, there's no formal interview - few minor exceptions. If the buyer is approved, he or she is then allowed to set up a closing date with the respective seller. The closing usually takes place at the seller's attorney's office. As a reference, the minimum time to close with financing can take up to 60 or more days.
Note: The condominium board has the first right of refusal on the sale, where they would purchase the respective residential unit in question - this rarely happens.
Closing
Before the closing you will perform a walk through of the apartment or home to ensure that everything is pursuant to the deal.
All parties will agree to meet
a) for a co-op at the management agent's office
b) condo or house at the seller's attorney's office.
At the closing the seller's attorney, the buyer's attorney, payoff bank for the seller's mortgage, mortgage bank for the buyer and in the case of a co-op there will also be a closing agent from the management company.
Buyers will bring certified checks for the payoffs that their attorney will provide to them in order to close the deal. Also a buyer will need to bring their check book and photo id.
Closing Costs for Sellers
This is a general guideline to closing costs. Consult your attorney for complete break out of the costs.
Condominiums & Townhouses
For the Seller
Own Attorney: 2000 and up (Flat fee or hourly Fee)
Application Fees: $250 & up
NYC Transfer Tax: Up to $500,000 = 1%, $500,000+ = 1.425%
NY State Transfer Tax: $4 per $1,000 of price
Miscellaneous Title Fees & Bank Payoff Fees: $200-$500
Broker Commission: 6%
Co-ops
For the Seller
Own Attorney: 2000 and up (Flat fee or hourly Fee)
Application Fees: $250 & up
NYC Transfer Tax: Up to $500,000 = 1%, $500,000+ = 1.425%
NY State Transfer Tax: $4 per $1,000 of price
Flip Tax: Typically: 1% to 3% of price (if applicable)
Stock Transfer Tax: $0.05 per share
Bank Payoff Fees: $200-$500 (if applicable)
For Sellers of Luxury Lofts & Apartment
I develop for sellers a core, centralized, marketing strategy to maximize revenues & enjoy a stress free sale by using multiple forms of technology while applying powerful psychology. (Specializing in the marketing of luxury apartments and lofts)
Research shows that Sellers struggle with an endless stream of brokers because of de-centralized marketing, stress, extensive time output, excessive phone calls at all hours of the day, and no-show appointments, while only reaching a small percentage of the target market. This limits their selling and revenue potential. Bringing an apartment to market requires total target market participation to maximize revenues that a classified listing can't bring. When utilizing a broker who will incorporate a cohesive marketing plan you'll decrease selling time, increase revenues and reach all members of the target market.
False broker claims, broker puffery and the desire to try to save money, moves sellers away from the ultimate solution of a centralized marketing plan for their most important asset.
The best investment a seller can make is to employ a knowledge broker who can provide an in depth home analysis to create a specific marketing plan that will reach the target market. This should be looked upon as an investment and not as an expanse as it can show a great return in terms of increased exposure, free time, less stress, a job done right the first time and maximal revenues.
Demsker Realty has developed the Luxury Loft & Apartment Home Analysis system and the Un-Broker model to address the needs of a comprehensive Marketing plan that generates premium results. While working with all types of sellers and luxury lofts or apartments we've been able to deliver superior results throughout New York City (NYC), Long Island City (LIC) & Brooklyn.
Commencing at Signing and re-occurring throughout listing period:
(all costs paid by Demsker Realty)
Mastermind Marketing
(The Most Comprehensive and Aggressive Marketing in the Industry)
Pre Marketing Activities
a) Professional Photographer to shoot space
b) Professional Floor plan
c) Develop marketing materials for Apartment (show sheet, building policy & faq, post card)
d) Video the Apartment, Loft or Townhouse
e) Personalized domain & Website for the Apartment, Loft Townhouse
Web Marketing (exposure to over 10MM people per month)
Just a sample of important sites used:
i. Demsker Realty - Featuring Omni Feed (automation to 350 websites)
ii. Street Easy (MLS type website) ,
iii. New York Times,
iv. New York Magazine,
v. New York Post,
vi. RLS – Rebny Listing Service and Syndication,
vii. OLR – Online Residential
viii. Trulia (MLS type website),
ix. Zillow Network (MLS type website),
x. Juwaii (Chinese buyer exposure)
xi. City Realty (Buyers website),
xii. Property Shark
xiii. Realtor.com
xiv. Yahoo Real Estate
xv. New York State MLS
xvi. CNN Money
xvii. Buzz Buzz Home
xviii. E-lookyLoo (meta data site)
xix. Agorify (meta data site)
xx. Blocksy (meta data site)
(National and International Audience)
Direct Mail Marketing
a) Direct Mail Postcards announcing Apartment to building
Brokerage Marketing
a) Rolex listing to all brokerage houses with Pictures, floor plan, and description. (circulation 27,000+)
b) On-Line Residential Database (brokers and consumers)
Email Marketing
a) Interactive Email blast (20,000+ circulation)
Prospecting
a) Proactive Prospecting throughout network to generate leads.
Open House & Private Showing Marketing
a) Capture & logging of all attendees, which will generate a list of leads that will be called & emailed updates to generate word of mouth.
All items will be monitored and adjusted to ensure the highest quality and proper exposure of the apartment.