FREQUENTLY ASKED QUESTIONS REGARDING CO-OPS IN WESTCHESTER NY

What is a co-op?
A co-op is a real estate corporation in which you purchase shares that equate to your apartment.  Therefore you become part owner in the building corporation.

When I purchase a co-op I have to pay monthly maintenance on top of my mortgage payment.  What is generally included in my monthly maintenance?
Items included in your monthly maintenance are your real estate taxes, heat & hot water expenses, sometimes cooking gas, all the costs to run the property which include the staff salaries, contracts with outside vendors to care for the landscaping, snow removal, doorman, and any amenities the property may have.  Generally about ½ of the monthly maintenance equates to your real estate taxes and the underlying mortgage interest.  At the end of the year you are provided with a statement showing your share of these expenses.  These are tax deductible items on your tax return. 

I hear that maintenance always goes up, is this true?
This is a correct statement, however maintenance may not go up every year.  The property must be maintained, whether this means a new roof is needed or the cost of insurance has gone up.  These rises in expenses are allocated to all the owners in the co-op.  Remember however if you lived in a condominium or a single family home and you needed a new roof or expenses go up you must expect increases as well. 

When researching into buying a co-op you will want to know how often and how much the maintenance has gone up over the last couple years.  You would also want to know why the maintenance has gone up.  Additionally when purchasing a co-op you want to know if there are any building projects that are anticipated in the near future that could increase the maintenance. 

Is a co-op a good investment?
Absolutely.  You are building equity rather than just piling up your rent receipts month after month.  Many times it is less expensive to purchase a co-op than it is to rent an apartment.  Many people purchase a co-op and build up equity which later allows them to resell the unit and buy another piece of real estate.  Some first time buyers purchase a co-op because it is affordable with the intention of reselling it down the road to upgrade to a condominium or house. 

How do I prepare myself to buy a co-op?
The first thing you want to do is speak to a mortgage lender who is familiar with co-ops to find out what you can afford. 

Then you are going to want to know how much money you are going to need for down payment and closing expenses.  While most co-ops require a 10% down payment, there are some that require more.  You want to know from the lender how much money is going to be needed for bank closing expenses.  From my experience the purchaser needs to have between $1800 - $3000 available for bank closing expenses. 

Additionally you will need to hire an attorney to review the co-ops offering plan & financials as well as your contract of sale.  Fees vary from attorney to attorney but you can expect to spend between $750 - $1200.

You want to be sure that your credit report has no errors and all your debts are paid on time.  When you purchase a co-op you are interviewed by a board of directors who will decide whether you are financially acceptable to the co-op.  If there are errors on your credit report you will want to provide them with letters to correct these mistakes.  If there are alot of late payments, open collection accounts, judgments or a recent bankruptcy, the board of directors could be concerned that you will not be able to make your monthly obligations, thereby rejecting your application. 

After you have been preapproved call our office and put us to work for you!
We will assist you in finding a suitable co-op and determine initially what the co-op board requires from a financial standpoint.  By us reaching out to the management company handling the co-op we can determine if you will fit into their financial requirements.  Some co-ops work on ratios and we need to be sure that before you put in an offer and have it get accepted that you in fact would qualify for a board interview. 

We will educate you on the value of the co-op unit that you are interested in by showing you what other similar units have sold for.  We want your offer to be an educated offer.  Remember sellers may ask whatever prices they want for their units but the value needs to be there.  Once you have an accepted offer and contracts have been signed by the seller and yourself, the lender is going to send out an appraiser to value the property.  If the unit appraises for less than what you are purchasing it for you may have to come up with additional monies or cancel the deal. 

At Century 21 Schneider Realty we have a well educated staff of co-op specialists who are ready to go to work for you.  Feel free to contact our office at any time with any further questions. 

We look forward to assisting you!

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