Investing in New York City
Demystifying New York City Real Estate: A Guide to Common Terms
New York City is a vibrant, dynamic, and diverse metropolis, and its real estate market is no exception. Whether you're a first-time buyer, a seasoned investor, or a curious renter, navigating the New York City real estate scene can be a daunting task. To make your journey smoother, we're here to demystify some common real estate terms that you're likely to encounter.
A condominium is a type of housing where you own the individual unit within a multi-unit building. You have the freedom to renovate and sell it as you see fit. Condo owners also pay common charges, similar to maintenance fees in co-ops. See our guide about condos vs. co-ops.
Co-op (Housing Cooperative)
Cooperative apartments, or co-ops, are a unique NYC housing concept. When you buy a co-op, you're technically buying shares in a corporation that owns the building. Residents are granted a proprietary lease for their unit. Board approval is often required for both purchasing and selling a co-op apartment.
A broker's fee, also known as a commission, is a payment made to a real estate broker for their services. This fee is typically paid by the tenant in a rental transaction and by the seller in a sales transaction.
Board Approval/Board Package
When buying or renting in a co-op building, you'll typically need to submit a board package. This includes financial documentation, references, and a personal statement. The board reviews these materials to determine if you're a suitable candidate for the building.
Common charges are fees paid by condo owners or co-op shareholders to cover the building's common expenses, such as maintenance, utilities, and shared amenities. These are typically separate from your mortgage or rent.
A flip tax is a fee imposed by the co-op or condo board when a unit is sold. The amount can vary, and it's used to discourage frequent turnovers and generate revenue for the building's expenses.
In co-op buildings, maintenance fees cover the operating expenses of the building, including utilities, staff salaries, repairs, and more. They are akin to common charges in condo buildings.
Closing costs are the additional expenses associated with finalizing a real estate transaction. They include attorney fees, title insurance, property inspections, and transfer taxes. Buyers and sellers typically share these costs, which can be quite substantial.
The mansion tax is a tax on the purchase price of high-value residential properties. In New York City, it is imposed on properties with a purchase price of $1 million or more, and the rate increases as the price rises.
The transfer tax is levied when a property changes ownership. Both the city and state impose these taxes, with rates based on the property's value. Buyers usually cover these costs.
Understanding these key terms is essential for anyone looking to engage in the New York City real estate market. It's a complex and fast-paced arena, but with the right knowledge and guidance, you can navigate it with confidence. Whether you're in the market for a condo, co-op, or rental, knowing the language and the process will be invaluable in your real estate journey. Happy hunting!