Buying a Co-op in NYC: Key Questions Buyers Need to Ask (2024)

The majority of apartments in NYC are co-ops and they have a lot more rules than other types of apartments. As a result, there is a great deal of questions that arise when a person is purchasing a co-op in NYC.

In order to make your NYC co-op search easier, below we’ve answered the most common questions New Yorkers ask Prevu agents about buying a co-op apartment.

Questions to Ask WhenBuying a Coop in NYC

• What is the key difference between a co-op vs condo?
• What is the required down payment for a co-op in New York City?
• How much will I need in financial reserves post closing?
• Can I sublet? If so, what is the sublet policy?
• What is a flip tax?
• Is gifting or co-purchasing allowed?
• Are pets allowed?
• How much are coop closing costs in NYC?
• Can I get assurance on making post-closing renovations before buying?
• What's included in my monthly maintenance payment?
• Do I need a buyer's broker when buying a co-op in NYC?
• Do I need a pre-approval to make an offer on a co-op?
• What debt-to-income ratio is required by co-op boards?
• Why don't co-op listings show square footage?
• What tips will I get for the co-op board interview?
• When will I find out if I am approved by the co-op board?
• How can I make my NYC co-op purchase more affordable?

1) What is the key difference between a co-op vs condo?

Whether you are purchasing a co-op in Manhattan or buying a co-op in Brooklyn, the key difference between a co-op vs condo is the type of ownership. Co-ops, also known as cooperatives, are owned by a corporation and are not considered real property. When buying a co-op apartment in NYC you are actually buying shares in the corporation that are allocated to that apartment and this entitles you to a proprietary lease.

When you are buying a condo, you are buying real property – similar to a single-family house or townhouse – that is an actual deeded property that receives a separate tax bill.

2) What is the required down payment for a co-op in New York City?

The answer is it depends. Every co-op is different. Many NYC co-ops allow for 20% or 25% down, while others expect 30% down. In the extremely exclusive co-ops you may find on Fifth Avenue or Park Avenue, we have even seen expectations that co-op buyers put down 40% or greater amount of money as a down payment.

While this might be good for the financial quality of residents in the building, it can affect your ability to purchase a co-op, so make sure to discuss with your agent to ensure you are focused on the right building.

3) How much will I need in financial reserves post closing?

Post-close liquidity is more commonly referred to as financial reserves. A good rule of thumb when buying a co-op in NYC is to plan to have twenty four months (two years) of mortgage and monthly maintenance payments as financial reserves (post closing). During the offer process, co-op sellers will ask to see a REBNY Financial Statement to understand a buyer's financial situation and available reserves.

To calculate reserves, include cash, marketable securities (stocks and bonds), and other investments or liquid assets that can quickly and easily be converted to cash. Some co-op boards may consider cryptoif documented appropriately. Generally other real estate and retirements accounts are not included.

Of course, there are always exceptions to the rule, a select few of the most exclusive co-ops in NYC expect buyers to have financial reserves post closing equal to the purchase price of the apartment.

To learn more about how much cash you’ll need when buying a co-op in NYC, read our blog post "How Much Cash Do I Need to Buy a Co-op in NYC?"

4) Can I sublet? If so, what is the sublet policy?

The rules around subletting a co-op apartment may seem restrictive to most people, but the primary goal of such rules is to encourage high shareholder occupancy as owners are generally viewed as more likely to take better care of the apartment and building than tenants.

Regardless of the reason for the rules, the sublet policy of each co-op may vary from building to building.

Many co-ops require you to live in the apartment for two years before being allowed to sublet. If you are able to sublet, most co-ops charge an additional fee for subletting, require board approval of the person subletting the apartment, and there can be restrictions or caps on the number of years you are allowed to sublet during the period of your ownership.

5) What is a flip tax?

A flip tax is a transfer fee paid for by a buyer or seller to the co-op during a co-op apartment sale transaction. It is simply a fee and technically not a "tax", therefore it is not deductible as a property tax as it is not levied by a government entity.

The amount of the flip tax varies from co-op to co-op, but this information is generally outlined in the building’s proprietary lease or co-op by-laws. A few of the methods co-ops use to calculate the flip tax include percentage of sale price, percentage of profits, set dollar amount per share owned, and the list goes on.

At the end of the day, it is important to be aware of how your co-op calculates this flip tax if applicable to your building as well as who pays the flip tax, buyer or seller. While the flip tax may not be a cost for you when purchasing a co-op, it will be something to keep in mind when you eventually sell the apartment in the future.

6) Is gifting or co-purchasing allowed?

Apartments in NYC are expensive and it is fairly common nowadays for first-time homebuyers to receive some help from a family member when buying their first place. If you expect that you’ll be receiving some funds from family or friends to make your co-op purchase possible, there are two things you will need to do.

First, make sure that the co-op buildings you are looking at allows gifting or co-purchasing. You don’t want to fall in love with an apartment you can’t purchase. Second, if gifting is allowed by the co-op, you will most likely need to document this gift with a letter. To learn more about documenting a gift, check out our blog post "Gift Letter – NYC Buyers Need to Document".

If you are planning to purchase a co-op with the assistance of a gift, make sure to mention it to your real estate broker and real estate attorney early in your co-op buying process to ensure you have the proper documentation.

7) Are pets allowed?

Unfortunately, not all co-op buildings are pet friendly. In fact, even if a co-op building allows pets, it may have restrictions on the number, type, and/or size of the pet(s) you are allowed to keep.

Larger co-op buildings typically have set rules that can be confirmed in the co-op by-laws (and some listing agents are pro-active by providing pet rules in the listing information). Smaller or self-managed co-ops may evaluate on a case-by-case basis.

While it may seem surprising, we have even come across some co-op boards that require pet interviews and/or reference letters for pets. Jumping through hoops – literally!

8) How much are coop closing costs in NYC?

When buying a co-op in NYC, buyers should expect to pay about one to two percent of the purchase price, or two to three if the apartment costs $1,000,000 or greater. Closing costs when buying a co-op are much lower than buying a condo in NYC as you are not required to pay mortgage recording tax or purchase title insurance.

Technically when you are purchasing a co-op, you are purchasing shares in the co-op, and therefore do not pay the mortgage recording tax. While it may be possible to purchase a type of title insurance for a co-op, most opt not to buy it.

You can estimate your potential co-op closing costs with Prevu’s interactive NYC closing costs calculator for buyers.

9) Can I get assurance on making post-closing renovations before buying?

The most polite answer is no. While it would be great to know definitively in advance that you'll be able to add a second bathroom or install an in-unit washer and dryer, the majority of co-op boards require board approval for all renovations.

Many co-op boards have alteration policies which clearly define the process for applying for such approval. If you are even remotely considering the idea of renovations down the road, make sure to have your real estate attorney review this policy to avoid any issues that might prevent you from making changes that you couldn't live without.

10) What's included in my monthly maintenance payment?

Your monthly co-op maintenance includes both your apartment's common charges relative to your shares in the co-op as well as the applicable pro-rata property taxes. Unlike condos which have separate bills for common charges and the specific tax bill for you condo unit, co-op tax bills are paid to the city by the co-op corporation at the building level. Therefore, you are contributing your portion of the taxes to the corporation.

11) Do I need a buyer's broker when buying a co-op in NYC?

It is always a good idea to have a buyer's broker during an apartment or home purchase in NYC. You want to have a real estate broker that will act as your advocate during every step of the process. This includes offer preparation, comparable analysis, negotiation strategy, and everything else you'll need from offer through closing.

It is especially true when buying a co-op. Given the additional and more rigorous requirements of the co-op board application process, working with a real estate broker dedicated to your interests will increase your chances of being approved by the co-op board. Your NYC agent or broker will help you in the preparation and review of your board application.

12) Do I need a pre-approval to make an offer on a co-op?

If you are planning to purchase a co-op apartment with mortgage financing, it is best practice to secure a pre-approval letter from your lender before considering an offer. Co-op buildings are very strict with financial requirements, therefore sellers are more rigorous with vetting a buyer's qualifications prior to accepting an offer.

Overall, it is always a good idea to be pre-approved when beginning an apartment search to show sellers you are serious and prepared.

13) What debt-to-income ratio is required by co-op boards?

A good rule of thumb is to target a debt-to-income ratio of 25% after closing to avoid any doubt during the co-op application process. Assuming all other financial and liquidity requirements are met, some co-op boards will allow deb-to-income ratios up to 30% but it is less common. To learn more about the topic, check out our Debt-to-Income Ratio - NYC Guide.

14) Why don't co-op listings show square footage?

Square footage measurements are not officially documented in co-op building offering plans as with condo buildings (this relates to the type of ownership for co-ops vs. condos). Rather, any square footage provided for co-ops will be rough approximations and are not reliable for benchmarking value.

For those co-op listings where the square footage is provided by the owner or listing real estate agent, it should be taken with a grain of salt, since there is no consistent practice employed across the board for measuring interior square footage of co-op apartments.

15) What tips will I get for the co-op board interview?

You've submitted your co-op board application and past the initial review and diligence by the management company. Next up is the NYC co-op board interview, but not to worry. There aretips for the co-op board interviewto help you succeed. Whether you or doing an in-person interview, or the more recently adopted virtual interviews via video calls, the best approach is to be yourself. Answer questions honestly and give the basic information to respond to co-op board member inquiries.

16) When will I find out if I am approved by the co-op board?

Formal co-op board approval is communicated by the managing agent. The timing of communication of the board approval will depend on the building, and can occur as soon the next morning after the interview or a week later. A good rule of thumb is to expect a formal answer within a few days.

In some cases, especially with smaller co-ops where you might meet with all of the owners, you may get informal acknowledgement that you will likely be approved at the end of the interview. But expect the natural caveat that formal approvals will be made.

17) How can I make my NYC co-op purchase more affordable?

In addition to choosing a local agent that can help you negotiate the best price possible for your co-op, you should absolutely consider a NYC brokerage that offers commission rebates to help you save when you buy.

Prevu offers the largest commission rebate in NYC. When you buy with Prevu, you receive half of the commission the broker receives for representing you - up to 1.5% of your purchase price. For example, if you purchase a $2,000,000 co-op in NYC with a 3% buyer's broker commission, you could receive up to $30,000 cash back with Prevu's Smart Buyer Rebate.

That's real money - especially when you consider how long it took to save up for your apartment.

Co-op apartments for sale in NYC

• Manhattan co-op listings
• Brooklyn co-op listings
• Queens co-op listings
• Bronx co-op listings

Prevu is the real estate technology company on a mission to save people money when they buy or sell a home. Our industry-leading Smart Buyer™ Rebate makes it possible for homebuyers in NYC to receive a commission rebate thanks to a seamless, end-to-end buying experience and the expert advice of a dedicated, salaried agent.