When Buying A Condo In NYC, Watch Out For These Things

Before buying a condo in New York City, there are several things to consider. There are hidden risks, but if you're working with a competent buyer's agent and lawyer, they'll alert you to the ones that are readily apparent. Here are a few things to watch out for that will probably go unmentioned if you don't inquire.

✓ Overstated Condo Square Footage

It makes sense for buyers to believe the listed square footage corresponds to the square footage they are purchasing, and in a sense, this is true. Condominium square footage must be calculated from the floor plan, as opposed to co-op square footage, which is simply made up (and frequently drastically inflated). How the calculation is done then becomes a challenge.

The offering plan for each condo contains information on how the unit's square footage was determined. It should be specifically in the "Special Risks" section. The fact that the square footage calculation is regarded as risky is not exactly encouraging!

When purchasing an office space in Manhattan New York City, you should anticipate that the square footage will be calculated starting from the outside of the walls. In other words, the square footage of the unit includes the entire area inside the walls. Additionally, structural components like columns will be used.

The square footage of the Units as measured in accordance with the foregoing method will significantly exceed the usable floor space of each Unit, as is customary in New York City, according to a recent offering plan

✓ Taxes and fees for renting out condos are possible.

Understandably, a lot of buyers believe that if they purchase a condo, they are exempt from flip taxes and rental fees. While both are much more common in co-ops, they can also be found in condos. In fact, we are aware of a condo complex with both!

These additional expenses, particularly if you're searching for an investment property, can dramatically lower your expected return.

You should check with the listing agent to be sure the building does not impose any unexpected fees or taxes before submitting an offer to purchase a condo. They might automatically respond "no," thinking that these fees only apply to co-ops, just like buyers, but at least they'll be in the clear if something comes up during the due diligence process.

✓ Property taxes that are advertised may be artificially low.

Although this is more of a problem when purchasing a condo in a new development, purchasers should still verify it.

The property taxes for "Year 1" are frequently mentioned on new projects. If the building is only partially finished in Year 1 and the average rate does not represent what buyers will actually pay, that poses a problem. In this scenario, "Year 2" property taxes will also be offered and must be taken into account.

You or your agent should check the unit's tax bill on the Department of Finance website even if you are purchasing a resale property. There, you may view the total amount of property taxes owed as well as any deductions, such those from the STAR program or a 421a tax abatement. The headline price should correspond to the advertised rate.

It should be noted that this understatement is also fully conceivable for co-ops, but you can't independently check it because co-op apartments don't have individual property tax bills; instead, the entire building receives one charge, which is then divided among the shareholders.

✓ Compared to co-op prices, condo prices are far more volatile.

The convenience and surety with which a condo can be purchased is by far the biggest benefit condos offer over co-ops. Your financial status, whether or not it will be your primary house, or who will live there are irrelevant to a condo. If you have the cash is the only thing that matters. For this reason, foreigners almost never purchase condos. But the Manhattan Office space will make it easy for you.

The problem is that anything that is simple to purchase is equally simple to sell. Condo prices will be significantly more erratic than co-op pricing, in both good and poor times. Co-ops must meet strict financial criteria that forbid speculation, while condo buyers are free to take on any level of risk they choose. You can typically buy a condo with just 10% down and any debt-to-income ratio you want as long as your lender is comfortable with it (although they typically top out at 43%) instead of the 20% down payment and 25% debt-to-income ratio needed to buy a co-op.