A co-op property purchase has certain requirements versus any other property purchase. Essentially a co-op is a corporation which owns a property typically an apartment building (or as you may know it a block of flats). The corporation may or may not owe money on a mortgage on the property. The corporation owns the legal rights to the property. The shares/stock in the corporation are held by the ultimate users of the property in proportion to the size of the various apartments. These shares carry with them certain rights and obligations. The rights include the use of individual apartments and common areas. There may also be rights to other properties such as storage units and areas or garages. The co-op is run by a board essentially elected by the shareholders. There are also rules which are set up in the beginning which may be altered by the shareholders from time to time. Sales of Co-ops are almost always subject to board approval of the purchaser. The board typically interviews the person and checks out their finances and character. The owner of the shares is required to pay maintenance charges on a monthly basis according to an annual budget set by the board and approved by the owners. This covers the costs of running the building, mortgage payments if there is a mortgage and property taxes. The co-op may also impose assessments if there are shortfalls and or major repairs or improvements. When one purchases a co-op part of the process is doing due diligence on the financial strength of the co-op and how well it is run. Co-ops also have varying restrictions on their use. This would include pet policies, occupation policies and most importantly the ability of the owners to rent out the property. They also impose fees for applications by renters and new owners as well as other fees which vary according to each co-op.
Certain co-ops also impose what is known as a flip tax. A flip tax typically represents a portion of the profit made on the sale of the co-op by the seller. Each situation and method of calculation varies. Other flip taxes are purely based on a fixed amount per share (which may be subject to change in the future).
Co-ops typically trade at a discount to condos (the other form of partial ownership) due to mortgages held over the whole property, restrictions that exist regarding their use and the method of ownership.
If you are purchasing in cash the approval process is obviously easier as it demonstrates a certain amount of financial strength. However, the approval process can still be a lengthy and arduous one and is totally dependent on the particular situation. In fact certain buildings, specifically higher end ones in Manhattan, only allow cash buyers.
In order to purchase a co-op in your situation the following would have to be considered:
Will they allow non-residents to purchase.
Will they allow occupation by a family member instead of the owner.
If either of the above is an issue would you be prepared to or be able to put your sister as a co-owner to overcome it.
The process would be to use your ZipRealty site to find appropriate co-ops. The site is very user friendly and an exceptionally powerful tool. Your agent can help set up searches. You could then, through the site, ask questions about or request showings of the co-ops you are interested in. The best way to proceed would then be for your agent to see if your situation would qualify with the particular co-op and if so arrangements could be made to view the co-op. You would negotiate a price through your ZipAgent with the sellers and once agreement is reached a contract of sale would be drawn up. Zip has a vendors list of attorneys that are highly experienced in the purchase of co-ops from which you could choose one to represent you. However you are free to work with whoever you are comfortable, remembering that a real estate specialist with experience in co-ops would be the best route to go.
You and your attorney would do due diligence on the co-op. You would apply for board approval and the board would review the application and probably conduct necessary interviews. Once you are approved you would meet with the sellers and the attorneys typically at the offices of the company which manages the co-op for the closing. You could issue a power of attorney, specifically for the transaction, to your sister or attorney if the co-op will allow this. At the closing payment will be made by wire transfer or bank guaranteed/cashiers check or some similar form of payment. Transfer of the stock/shares would take place simultaneously. Before the closing a final walk through would be done by you to see that the apartment is broom clean and in good order.
Your experienced and service oriented ZipAgent would work with you throughout the process assisting to the best of his or her ability in order to make the process as smooth as possible. But it is a process.
Please note that whilst I have made my best attempt to describe the implications and process, I am not an attorney. This should not be taken that this is a complete set of facts that would apply to every situation, but more as a guide to the process. Should you require legal advice, I would gladly put you in touch with a number of qualified professionals in this regard. There also may be certain tax imp;locations which should be discussed with a qualified tax professional.
Should you have any further questions or require any additional information please feel free to contact me via e-mail, text or phone at any time. My e-mail address is martin.freiman@ziprealty.com and my cell phone number is 914.772.4775.
