What Are The Steps To Buying A Co-op Unit?
The first step to buying a co-op unit is to sign a contract of sale and tender the down payment to the seller’s attorney to hold in escrow. Once you have a fully executed contract, you must make an application to the board for co-op approval. The board has a lot of discretion; they can reject a purchaser and they do not have to provide a reason for the rejection. This can be very frustrating to co-op buyers, who really want to buy a unit and feel like they are qualified but for one reason or another, the board decides to reject them and does not provide them with any sort of explanation. Some boards require that the buyer obtain a mortgage commitment before they review the application. You should talk to your lender and start the application process right away. You should also fill out the board application and submit that as soon as possible. In fact, the co-op purchaser is required to take prompt action on both applications pursuant to the terms of the standard contract of sale for a co-op unit.
Once you have board approval and a mortgage commitment or a clear to close from the mortgage lender, you and your attorney will coordinate with the management company and the transfer agent. The transfer agent handles the closing on behalf of the co-op corporation and the closing usually takes place at their office. At a co-op closing, the transfer agent cancels the old shares of stock belonging to the Seller and the old proprietary lease. Then, the transfer agent issues a new proprietary lease and new shares of stock to the purchaser on behalf of the corporation. It is important that the seller, if they have an existing loan on the co-op unit, orders a payoff of that loan and that the lender sends someone to the closing with the original shares and the original lease so they can be canceled. If the original shares of stock and proprietary lease are missing, this should be addressed well in advance of the closing.
As a co-op buyer, you should confirm that your homeowners’ insurance is effective as of the closing date and make sure that the lender has any co-op insurance documentation they need prior to closing. Depending on the co-op, the co-op corporation may also require you to obtain co-op insurance for your unit. It is always recommended that you get co-op insurance for your unit, even if it is not required, because it will protect the interior of your co-op unit.
Prior to the closing, the buyer should work with the real estate agent to set up a final walk-through to make sure that the house or the property is in its expected condition. Sometimes, during the walk-through, there might be an appliance that is not working or some other problem such as unwanted junk or garbage being left behind in the unit. These issues are often addressed at the closing in the form of a credit or sometimes, money will be held in escrow until the situation is remedied by the Seller. In addition, the purchaser should also call the utility company and set up a new account for any sort of heating or electricity. An experienced co-op attorney can assist you with the various tasks you must complete prior to closing, at closing, and after closing.
How Much Are Co-op Closing Costs Generally In New York?
The closing costs vary from co-op to co-op based on the fees that particular cooperative corporation charges. The purchaser will pay any fees to their lender, which are taken out of the loan proceeds. In addition, the purchaser will pay co-op required fees such as move-in and move-out fees. Sometimes, those are refundable; sometimes they are not. Some corporations will charge a capital contribution, which will go towards the expenses of the co-op to maintain the building and the premises. The Purchaser will also most likely pay the first month of maintenance as well at the closing as well as a legal fee to their attorney.
The purchaser saves money on in a co-op transaction because you do not have to purchase title insurance. Title companies do offer insurance policies for co-op purchases, but these policies are usually not required. In most co-op transactions, the purchaser will do a lien search and that will show if there are any liens on the shares of stock that have to be satisfied before or at the closing. The lease search costs around $350, which is a lot less than a title search and obtaining title insurance. The lien search is necessary to ensure your shares of stock are clean and not encumbered with any liens.
From the seller’s perspective, the major closing costs are going to be a brokerage commission to any real estate agent involved in the sale and a transfer tax to New York State. The particular co-op may impose a flip tax or other fees on the seller. The flip tax is not really a tax but is rather a fee the co-op charges to all sellers when they sell the unit.
How Can A Real Estate Attorney Assist Me In Buying Or Selling A Co-op Unit In New York?
As with any purchase of real estate, it is important to use an attorney when purchasing a co-op unit. It is important to have an attorney review the terms of the contract of sale and negotiate the terms to provide you with as much protection as possible. An experienced attorney will make sure that the shares of stock you purchase are not going to be encumbered by any liens and make sure that the seller fulfils any obligations that he or she might have to pay off any liens that are attached to those shares.
Attorneys who are experienced in the details of a co-op transaction know the steps that must be taken in a purchase of a cooperative unit. Your attorney should coordinate and answer any questions you have and assist you to troubleshoot any issues you might experience with a loan you are obtaining in connection with the co-op purchase. An experienced attorney will review and analyze the lien search and go over any issues and determine how to address these issues. Your attorney will also coordinate with the transfer agent, the management company, the seller’s attorney, and you to make sure everyone is prepared and ready to close.
For more information on Buying A Co-op Unit In New York State, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (800) 619-3570 today.
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