What you need to know about buying a coop in NYC in 2023

November 11, 2020 by Georges Benoliel

Is it worth buying a coop in NYC? Buying a coop in NYC can be tricky. It takes longer and requires more steps than buying a condo, so it’s good to plan. Here’s what you need to know. Coop apartments make up approximately two-thirds of housing stock in NYC. Therefore, if you plan on buying a place in the city, you’ll likely encounter coops. Coops are also more affordable than comparable condos or single-family homes since it’s harder for foreigners and investors to purchase coop buildings. So what exactly are they? How much do they cost? And how do you buy one? This guide will cover what you need to know about buying a coop in NYC, the pros and cons, and the questions to ask when buying a coop in NYC.

What does it mean to buy a coop in NYC?

A coop is not “real property,” so when you buy a coop in NYC, it means you’re buying shares of a corporation. These shares come with a proprietary lease that allows you to occupy the apartment. New York City coops are also well known for their notoriously strict coop boards, which can deny a buyer for any reason. This can make it more complicated to buy or sell a coop apartment.

This type of ownership has numerous implications. You won’t receive a deed; you’ll hold stock in the cooperative corporation. This also means that financing a coop will work differently.

You’ll get a co-op loan, and the application requirements will typically be more stringent than a traditional mortgage on a condo or townhouse.

While this may sound like a drawback, you’ll enjoy the associated benefit of not having to pay the NYC mortgage recording tax. This is one reason coop closing costs are generally significantly lower than condo closing costs in New York City.

How long does it take to buy a coop in NYC?

Once you’ve found a place you want to buy, it typically takes between 6 and 12 weeks to close on a coop in NYC. The exact time will depend on the property and whether you’re making an all-cash purchase or financing. All-cash buyers can expect to close in as little as 6-10 weeks.

If you’re financing the Coop, you can expect it to take 8-12 weeks. Remember that you’ll still need to budget some time to find a place, which can often be the most time-consuming buying process. Also, the timeline can be delayed if something goes awry during the purchase process.

Is buying a coop a good investment?

Buying a coop can be a good investment under certain circumstances, as New York City’s real estate has been on an upward trend in recent years. That means if you plan to buy a coop and live in it for an extended period, it will likely appreciate and prove to be a good investment.

With that in mind, coops are not typically as attractive to investors as condos as they can be harder to sell, have more restrictions on subletting, and have a flip tax.

Pros and cons of buying a coop in NYC

When deciding if buying a coop is right, weighing the pros and cons is essential. There are numerous advantages to buying a coop but also some downsides.

In short, the most significant pros of buying a coop are affordability, while the cons are related to less convenience and flexibility compared to condos. Here’s what you’ll want to consider.

Coop Pros

1. Coops are generally cheaper than condos.
2. Closing costs are typically lower than condos.
3. Most coop buildings are majority owner-occupied, meaning you won’t have a constant revolving door of new neighbors.

Coop Cons

1. Buying and selling a coop is typically more complicated due to the stricter board approval process. (debt to income ratio, post-closing liquidity)
2. Coop buildings may have restrictions when it comes to things like subletting.
3. Coops may have stricter house rules regardinitemsgs lcy and in-unit laundry.
4. Coops may have flip taxes to discourage investors from flipping apartments in the building.

Steps to Buying a Coop

1. Figure out your budget and get preapproved
2. Decide on a neighborhood.
3. Hire a broker and start your search
4. Submit your offer and negotiate a deal
5. Sign the contract
6. Submit the board application
7. Close the deal

Questions to ask when buying a coop

Because cooperative buildings have more restrictive house rules than condominiums, you’ll want to know what you’re getting into before purchasing. Here are some critical questions to ask when buying a coop.

• What is the sublet policy? NYC coops often have a restrictive subletting policy, so if you plan on moving away and subletting the apartment, you’ll want to be sure the building allows it.
• Is there a flip tax? It’s important to know if the building has a flip tax, how much, and who is responsible for paying it.
• How much have maintenance fees risen in the past five years? You want to make sure you’re buying in a well-managed building, and a great way to gauge this is by looking at how much maintenance has increased. If maintenance rises by a few percentage points each year, that’s fine, but if it’s jumping by close to double digits, that’s a red flag.
• How are the building’s financials? You want to ensure the coop building you’re buying has good financials and a healthy reserve fund. The last thing you want to worry about is unexpected assessments.
• What is the deal with air rights?
• When buying a coop, you’ll want to know that the building is in good condition. What condition are the roof, facade, boilers, and elevators in? If it needs repairs, the reserve fund may deplete, and you may have to pay additional fees, or the maintenance may increase.
• Is there a land lease? While buying a coop in a land-lease building might seem attractive initially, the low selling prices are rarely worth it in the long run, as land-lease buildings have incredibly high maintenance fees.
• Do I have to pay for title insurance to buy that given Coop?

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