CONDOS 101

Last month, we explored the intricacies of the co-op. This month, let's jump into its less-common counterpart, the CONDO. Condo ownership is much more traditional, as is the process to buy one, so this blog will be much shorter than last month's.

What Is a Condo?
Unlike a co-op, a condo is real property, and it comes with a corresponding deed. And instead of the proprietary lease you receive with a co-op, for a condo you are issued a traditional mortgage. 

Once you've bought a condo, you'll have to pay monthly maintenance fees. These fees only include standard building upkeep and maintenance (staff salaries, utilities, etc.), none of which are tax-deductible. As a real property owner, you will receive a separate real estate tax bill for your specific unit, which you'll be required to pay quarterly. Like with any other property, these real estate taxes are tax deductible.

What's the Application Process Like?
Like a co-op, you will still need to fill out a purchase application, but -- depending on the building -- the requirements will generally be MUCH fewer. Some condos will require a full financial disclosure, others little to none; some will require letters of recommendation, others none. But the one big perk of a condo: no board interview!

So What Does the Condo Board Do?
While there isn't a board interview with a condo application, the board will still review your application. And while they're looking to make sure you're a financially feasible candidate, the real purpose of the review is for the board to determine if it wants to exercise its ​Right of First Refusal.

Right of First Refusal
​What happens when someone lists their apartment for way below market value in an effort to sell the place quickly? It may drive down the neighborhood comparables and threaten the appraisal value of your own property. In an effort to avoid this from happening, a condo board has the Right of First Refusal, which means it can match any offer - ​term-for-term​. If a board exercises its right of first refusal, it purchases (or rents, if the apartment is up for rent) the condo and can then resell it themselves.

​After you submit your purchase application, you cannot move forward with the purchase until you receive a waiver from the board that they will not exercise their right of first refusal.

Why Would I Buy into a Condo?
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Your Place - Your Rules (Mostly)
When you buy a condo, you're buying real property, and the rules tend to reflect that fact. You want to rent it out? Go for it! (Condos will still have rules, including the tenant-to-be sometimes needing to submit a complete board package, but they will generally be much less restrictive than in a co-op). You want to use it as an investment? Sure!

More Financing Options
While most co-ops require at least 20% down, many condos will allow lower down payment requirements (10%).

Well Now This Sounds Pretty Great! What Are the Downsides?

Higher Closing Costs
Because a condo is real property for which you receive a mortgage, you have to pay the upwards of 2% mortgage recording tax. On a $500,000 apartment example, that's $10,000 in additional closing costs that you wouldn't incur with a similarly-priced co-op.

Higher Purchase Price
Because of the flexibility in rules and financing, condos typically command 10%-20% more than co-ops.

Less Inventory
While condo inventory has grown over the years, they still only make up about 1/4 of New York City's real estate inventory. So if you're dead set on a condo, brace yourself for a potentially longer hunt for that perfect home to come to the market.

If you're ready to make the jump into home ownership, I'm always available to help with your search. Please reach out any time!