Real Estate 101

[Dolce Corazon]

My mother is looking to invest on making her first real estate purchase.

She wants to invest in a co-op or condo for my boyfriend and I to live in after I graduate this year.

We know absolutely nothing about real estate

What are some good websites/books to check out?

I'm not looking to jump in exactly right now, but to get myself familiar with everything.

Thanks!

[luvmeluvmycat]

IDK how I feel about co-op's...Anyone else have opinions on them? Pros and cons?

[admin]

Here's a key differences between condos and co-ops to help you understand.

Form of ownership: The key difference between a condo and a co-op. A condominium owner actually owns the apartment in fee simple, like any other homeowner, and owns an undivided interest in the common areas like parking lots, recreations areas, lobbies and hallways.
In a cooperative apartment complex you don't actually own any real estate. Rather, you own shares in a not-for-profit corporation. As a shareholder you get the right to lease space in the building. The corporation owns the common areas. The effects of this are varied. Real property, for example, descends to your heirs while the co-op's tenant-stockholder's shares pass as personalty to your personal representative and may be subject to securities regulations. Generally, a condo is considered real property and a cooperative is considered intangible personal property.


Property taxes: Because condos are owned individually, they appear in the property tax rolls as separate entities and, accordingly, individual owners are taxed separately.
The entire property co-op is owned by the corporation, so it appears on the tax rolls as a single piece of property. The corporation pays the property taxes and passes along the cost to the tenant-shareholders, usually as part of the monthly maintenance fee.
Property taxes generally run lower in co-ops than in condos. That again goes back to the form of ownership. When condos are resold as separate entities, the appraisals and higher sales prices are recorded individually. This has the effect of producing higher assessed values and consequently, higher property taxes. Co-ops -- as sales of stock -- are not recorded at all and the only way a sale could be reflected in tax rolls is if the entire piece of property were sold, which is rare. Therefore, the rising value of the property usually lags in terms of assessed value and corresponding tax bills.


Financing: Generally speaking, there are two issues of financing when speaking about cooperatives. First, there is the underlying mortgage -- or blanket mortgage or master mortgage or corporate mortgage -- that funded either the original construction or conversion of rental apartments to a co-op form of ownership. Payments on that mortgage are paid by the corporation and then are passed along in the monthly maintenance fee to the tenant-shareholders. Secondly, there is the matter of whether the tenant-shareholder had enough cash to buy into the building or if he had to borrow the money.
Attorney St. John points out that since there is no fee simple ownership of the unit, it is sometimes difficult to obtain financing because the security for the loan is the resident's shares in the corporation. Many lenders will not lend money on a co-op at all. Consequently, most co-ops have relationships with a few "approved" lenders who will finance sales. But that means those lenders have an actual stake in the building and often demand that they have a voice in how the corporation is run. These lenders also generally offer far fewer mortgage options, normally require larger down payments and charge higher interest rates.
Other important points: Most co-op owners cannot get a home equity loan or line of credit and in a co-op each individual is dependent on the solvency of the entire project. If the corporation were to go bankrupt, all shareholders would feel the pinch. Individual condo owners are responsible only for mortgage debt and taxes solely on his property.


Federal tax deductions: In the condo situation, each individual is able, easily, to deduct payments made for mortgage interest and property taxes if he resides in the unit and further deductions for such things as depreciation and maintenance if the condo is used as a rental property. The co-op tenant-shareholder can only easily deduct his proportionate share of the property taxes and interest on the underlying mortgage. If other monies were borrowed to finance the actual purchase of the tenant-shareholder rights, deductibility depends on several different factors and is not done as easily.


Monthly fees: Maintenance fees, paid usually on a monthly or quarterly basis, generally are significantly higher in a cooperative because the corporation is collecting mortgage and property tax payments from each shareholder in addition to the periodic assessment for things like lawn care, pool cleaning, security and insurance. The corporation also frequently includes all utilities.
Co-ops have an advantage when it comes to special, costly repair or capital improvement projects, because they can borrow funds, adding to the amount of the blanket mortgage. The shareholders then pay off the cost of the project in their monthly fees. Condos cannot borrow money as an entity and therefore unit owners often face large assessments for similar projects.


Ownership Transfer: One of the good things about not being considered real estate is when the lease rights to a unit in a co-op change hands (because a seller sold his stock shares to a buyer) there is much less in the way of state and local taxes on the transaction and far less in settlement costs because there's no appraisal, survey or title work to be done. This also comes in handy for celebrities who want to keep their address and purchase price hidden from the public. Again, because it's a transfer of shares and not real estate, the transfer is not recorded in any public place.


Powers of the board: Despite the fact that many condo associations contend that they are empowered to either approve or disapprove the transfer of ownership, the reality is that they have almost no power at all. Co-ops, on the other hand have the right to approve or deny the sale of shares on the basis, for example, of the buyer's perceived inability to make the payments. They can also block the sale to celebrities; for example, who they feel may disturb the peace and quiet of other shareholders. Cooperatives, of course, are bound by federal fair housing laws and cannot discriminate against buyers due to race, religion, sex, nationality, etc., but they can -- and do -- choose people based on financial resources and criminal background. Condos cannot exercise that kind of control.

[MichelangeloWHO]

co-ops are annoying...

[joe!]

condo all the way. actual ownership means the world to me.

[antknee]

Depends where you're looking to purchase. Most of NYC are still co-ops. I always was skeptical about co-ops until I researched more about it. Correct me if I'm wrong, but I believe maintenance fees are much higher than condos due to the fact that real estate taxes are included in the maintenance. My sister owns a co-op on Park Ave, and pays about $900/month on maintenance....but her mortgage is only $600.....so it works out in her favor. Co-ops are usually priced lower and the fact that you own shares, turns a lot of buyers off. I think its more mental than anything.....and I'd def consider it in the future if I was purchasing another condo.

[joe!]

part of the mortgage payment that the owner pays is also rolled into your maintence in co-ops a lot of times.

[Dolce Corazon]

All this info is great guys! I'm pretty much printing the thread and researching it all

Depends where you're looking to purchase. Most of NYC are still co-ops. I always was skeptical about co-ops until I researched more about it. Correct me if I'm wrong, but I believe maintenance fees are much higher than condos due to the fact that real estate taxes are included in the maintenance. My sister owns a co-op on Park Ave, and pays about $900/month on maintenance....but her mortgage is only $600.....so it works out in her favor. Co-ops are usually priced lower and the fact that you own shares, turns a lot of buyers off. I think its more mental than anything.....and I'd def consider it in the future if I was purchasing another condo.

I'm pretty much looking into NJ, maybe NY. Your sister gets a sick deal

[antknee]

All this info is great guys! I'm pretty much printing the thread and researching it all



I'm pretty much looking into NJ, maybe NY. Your sister gets a sick deal

yea she def is. She bought that condo back like 7yrs ago and paid $130K for it. It was appraised recently at close to $400K. She actually just bought another spot in Guttenberg (right above Edgewater)...another co-op, but the maintenance there is ridiculous....its like $1200-1500/month! One thing you have to remember w/ co-ops is that you have to go in front of a review board for consideration of even living in the place you wish to buy. There are also restrictions as to things you want to modify (eg taking walls down, redoing bathrooms, etc). All these things need to be approved by the board before you actually can remodel shit....unlike a condo where you can do whatever the hell you like. Good luck.