|Senior Vice President
GuardHill Financial Corp.
950 Third Avenue, 24th Floor
New York, NY 10022
Tel: (212) 688-9500×229
Email: [email protected]
New York City is one of the most difficult areas to obtain mortgage financing. The main reason is because it is filled with COOPS and Condos. COOP or Condo approval is often twice as challenging as getting a loan applicant approved.
Things to look for when buying an apartment in New York City:
Building must have at least 51 – 70 percent presale
Walk up buildings (no elevator) – must be done with Fannie Mae. Some portfolio banks will not lend in them.
AIR (artists in residence) buildings- there is a rule that you can only sell to an artist
Be careful with units with small square footage
Make sure there are not too many investors in the building- no more then 10%
Adequate reserve fund -be sure the building is budgeting 10 percent of the maintenance for the reserve fund.
Building insurance – must be 3x the maintenance
Commercial Space- building can not have more then 20 percent commercial space
Flip tax (COOPS) – the percentage that the managing agent charges the seller on the sale price or the sale proceeds. This is deducted from the value, for bank appraised value purposes.
Please note that we do have lists of approved COOPS and condos, so it is always helpful for you to check with Julie Teitel at Guardhill to be sure that the building you are purchasing in is on the approved list. There are always exceptions to the rules; this should be used solely as a guide.
Not only is New York a difficult place to obtain financing but it is also the most expensive state to close a mortgage in. Mainly, because New York has a state mortgage tax. In New York City (Manhattan, Brooklyn, Bronx, Queens and Staten Island) the tax is 1.750% – 2.000%. In the rest of the state the tax is .750% to 1.000%. If you are looking to refinance, there is a loop hole in the law that can save the tax. It is known as an assignment of the mortgage, or CEMA. Please note, there are fees from the payoff bank as well as from the attorneys doing the work.
On rare occasions, an assignment of mortgage can be done on purchase transactions.
Areas of New York City with the highest real estate value:
Central Park on the East side
Park, Madison and Fifth Avenues below 95th Street
West side below 96th Street
Areas in NYC with the largest decline in value over the last year:
COOP vs Condo:
COOP: You are buying shares of a corporation. It is not real property.
Currently I would estimate that 25 percent of NYC is COOP. Fifteen years ago 80 percent of NYC was COOP, but the latest increase of new condo conversions has lessoned the percentage.
Generally, COOPS are less expensive to buy. The purchase price and closing costs are cheaper. The cost to mortgage a COOP in New York City is approximately $3,000 to $4,000.
Keep in mind, you must obtain board approval in order to buy in the building. The board approval process can often be more difficult then obtaining a mortgage.
It is important to have a good real estate broker that can put together a great package for the board.
You must also get board approved if you want to refinance, remodel, etc.
Condo: Real property.
You must pay state mortgage tax when purchasing a condo, therefore, the costs in the 5 boroughs could be as high as 3.875% – 4.250%.
A single family residence or condo outside the 5 Boroughs could cost as much as 2.875% – 3.250%.
The sales market in the New York City has been protected and has held its value through these tough financial times.
One reason is due to foreigners buying in the area. Approximately 15% of NYC sales in 2010 were to foreigners.
The last couple of years have also seen may first time home buyers, who do not have to rely on the sale of their property in order to buy.
A very useful website for monitoring real estate value is www.streeteasy.com.
When buying an apartment in NYC, contact the managing agent of the building and request comps. This is a good way to figure out the price per square foot in a particular building.
A good periodical to keep you current with the New York City market is The Real Deal, which discusses new projects, recent sales, and the future of the market.
FHA loans are also more difficult in New York City. Don’t fall into the trap of trying to secure an FHA loan in New York City. Unless the building is FHA approved it is nearly impossible to get an FHA mortgage on a Condo or COOP. Even if the building is FHA approved, you still need to exercise caution as many lenders have their own overlays of rules in addition to the FHA rules.
Fannie Mae PERS approval – Fannie Mae condo project approval is also known as PERS approval. If a building is PERS approved, then most Fannie Mae banks will lend in it.
Current Environment in NYC
The market seems to be stabilizing.
At its worst we only saw a 10 – 20 percent drop.
With Unemployment numbers coming out low I believe we will see housing follow and dip slightly. Housing tends to lag behind by a couple of years.
The average sale price in NYC in 2010 was $1,482,650. In 2009 it was $1,296,156.
There were 2,295 sales in NYC in 2010 and 2,247 in 2009.