Closing Cost Estimates for NYC Sellers

Yes, as I wrote about last week, selling is expensive. But on top of the work you need to do to get a property show-ready (deep cleaning, painting, maintenance, and staging), there are the actual fees for attorneys and taxes for the city and state.

The interesting thing about seller closing costs is that they vary much less by property type than do buyer closing costs. For buyers, a condo or townhouse has significantly higher closing costs since they are real property instead of shares. Co-ops are shares in a corporation rather than actual property, so you avoid paying the “mortgage recording tax” that adds 1-2% of the purchase price in fees.

The biggest cost for sellers? Paying commission. And I totally understand that a lot of sellers view this as . But you cannot think about it as a negotiable cost. What you CAN negotiate is who you want to represent your property. Because two people are involved in the agreement.

Too often people think that hiring an agent is a one-way street, like any agent will take any listing. For some people that’s true, but you should think twice if someone is giving in to whatever price you want, a commission discount, and is just saying “yes” across the board. If they aren’t being thoughtful, they may just be collecting listings to leverage for OTHER business with no intention of actually selling your place. Because if your home is overpriced it’s just going to sit on the market and the agent wont’ actually have to put time in showing. On the other hand, if the agent has a plan, opinions, and conditions under which they will accept your property, they are probably planning to actually get the job done. Interview multiple agents, listen to friends’ recommendations, etc, but in the end you should go with someone who you like but who actually cares and will stand up to you if you’re missing the mark.

OK, enough from me. Scroll through the estimates that Compass did such a good job making so beautiful and helpful. And email me if you have questions or want to sell your place.

xo

Anna

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New York Values #54: Co-op Board Rejections

Co-ops are a huge part of NYC’s real estate market, despite the fact that anything being built today is a condo. I’ve explained the differences in property types, mentioned how the unique mechanisms for approving buyers help keep the city’s real estate market stable, and outlined the process for purchasing one. But today I want to talk about one of the downsides of co-op purchasing, something that has become more common over the past two years in a challenging sales market: board rejections. 

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The Good

There is a reason that co-op boards have a right to reject someone for nearly any reason (minus racism/sexism/ageism/etc).  When you buy into a building with other people you are buying into a community, and they want to . If you are extremely mean during the application process when you should be on your best behavior, they will probably imagine you’re only going to get worse once you move in. If you claim not to smoke and it’s a non-smoking building, but you show up at the interview reeking of cigarettes, you may not be the right fit. Yes, sometimes this turns sour with board members making a business decision too personal, but sometimes it’s for the benefit of all parties involved.

They also want to make sure that you are financially qualified. Bank lending standards vary wildly, even since the crackdown in sub-prime mortgages after the ’08 crisis. And the seller may not care that a buyer would only have $10 left over after closing. But allowing someone who can’t really afford to buy purchase a home puts the building at risk. This is a problem in condos that causes the apartments to go up and down in value whereas co-ops tend to fluctuate less. 

The last positive rejection reason is to protect the building. If too many units in a building are owned by the same person or company, or if too many are rented out at one time, it can cause issues with banks’ ability to finance a building. Meaning you could be going to sell and the buyer can’t get a mortgage. And nothing drops the value of a home faster than it needing to be a cash deal. Yes, there are cash buyers, but any time you limit your buyer pool you are taking money out of your own pocket. 

The Bad

Boards are made of human beings, meaning they are fallible and sometimes make poor choices. There are two common and incredibly stupid reasons that these boards reject buyers. I’m sure there are others, but these have come up a lot over the past couple years. 

The first is a rejection because the buyer has “too much money” to purchase a home. This is usually because one person on the board, often who was a holdover tenant from when the co-op was still formed, or someone who bought decades ago for 45 cents and a cow, and thinks that the building needs to retain . It’s a bias against wealthy people that is often also bias against millennials. Sorry, guys, millennials with trust funds are the ones who can buy right now. It’s not their fault that they have money, and they aren’t inherently evil or lazy because they do. If they are buy8ing in a co-op that means they DO have their own source of income, so why don’t you welcome this influx of money rather than listen to the chip on your shoulder?

The second, which was INCREDIBLY common in 2019, is a rejection because the board doesn’t like the price. Since about 2015 the market has been in a correction, meaning that while it was going up and up each year from about ’08-’15, prices have been dropping since. In 2018 no one seemed to buy anything because sellers and buyers were so far apart with what each wanted. So then in 2019 sellers became more realistic and were able to meet buyers in the middle. 

The Ugly

Co-op boards are allowed to reject someone for ANY reason, as long as it isn’t against fair housing laws. But again, boards are human. And it’s not like these people have taken legal training to be on a board. They just happened to own in the building. That’s the only qualification. So here are some real examples of completely bullshit reasons that shouldn’t be tolerated, but sometimes are.

The first example is a couple purchasing in a co-op where she mentioned in her letter to the board how excited she was to raise her baby in the new apartment. The board rejected her and the seller was told this was because the board decided she would probably stop working soon and they wouldn’t be able to afford a nanny or appropriate help on just the husband’s salary. This is speculative, sexist, and disgusting. 

The second example is a co-op that has decided it wants to keep the “cultural integrity” of the building, i.e. only accept buyers of a certain race or nationality. It’s not always white; this can be a reaction to gentrification as well, where a building tries to keep “too many” white people from moving to an area. This is clearly racist and illegal, no matter the perpetrators. 

The last example is ageism, where someone on the board doesn’t trust the new buyer at his/her word because of age. Yes, I’m a 35 year old professional, but that doesn’t mean I’m going to Airbnb this apartment! Yes, my money came from legal activities; I showed you all my documents and tax returns. Yes, I plan on living here and being part o the community. No, I’m not flighty and irresponsible just because I’m younger than you. There are few things more frustrating than following the rules and doing everything right only to be told by someone that you’re clearly lying and actually breaking the law. Again, this isn’t legal, and it shouldn’t be tolerated. 

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So overall, I love co-ops. Not every co-op is for everyone, and you need to shop around to find the size, amenity level, and vibe that works for you. Really, the only reason to avoid co-ops is if you want to buy the property to rent out for passive income. If you want to live there, it’s an amazing way to buy into a stable community and pay far lower closing costs/75 cents on the dollar compared to a condo.

And I think as co-op boards are slowly dragged into the 21st century, the process will just become less painful. As much as they fight it, we need oversight to make sure that racism, sexism, ageism, and other illegal reasons for turning someone away are eliminated. Because right now it’s just another example of the smallest amount of power potentially turning someone from a homeowner into a control freak who wants to keep anyone he doesn’t like out of the building.

If you do buy in a co-op, I also highly recommend you get on the board. Because if you’re reading this, you’re clearly better educated about real estate than most of the public, and will ideally be good at following all the laws. They exist for a good reason!

xo

Anna

New York Values #13 - Flights

Today is my BIRTHDAY and I woke up at 4am in Reykjavik, Iceland after a 24 hour layover to head to Berlin. Iceland was cool and I’m glad I had a day to check out Reykjavik, which is really beautiful, but I’m definitely going back with a crew and enough money/time to rent a car and drive the whole country. 

In light of my being abroad, today’s New York Value is about how living in NYC makes it so easy and cheap to travel compared to most of the United States. New York is home to two large airports, JFK and LaGuardia, and although Newark is in NJ it’s still very much a NYC airport. LaGuardia is a domestic Delta hub, while JFK and Newark are major international airports with cheap service around the country and world. I thought living in VA and having such easy access to Dulles was amazing, but pretty much any time I compare prices, flying from NY is substantially cheaper.

I met a girl yesterday who goes to school in LA, and she expressed how jealous she was at what I’d paid for my flight (very little), and how easy it is for her East Coast friends to visit Europe, Africa, and the Middle East (ok, she just said Europe, but it holds true for all). Although it’s easier for West-coasters to get to Hawaii and Southeast Asia, Eastern Europe is my favorite place ever, so I’m glad I’m on the better coast (KIDDING! I love CA/Oregon/Washington, but I have no interest in living there). 

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Real Estate Value? Also international themed.

NYC’s housing market has remained stable throughout time in a way that very few can. Part of this is the city’s role in the international economy. Part of it is also the barrier to entry of owning, especially in Manhattan, and most specifically related to the concentration of co-ops.

Having enough money to purchase a co-op is not enough; you also need to show you have two years of “post-closing liquidity” after the sale. In a co-op your monthly HOA fees are called “maintenance,” and you basically need to prove that you will have, in cash or easily liquidated stocks/investments, 2 years of this amount, as well as your mortgage payments, after you buy. For instance, many apartments on the lower end of the price range in Manhattan, at $500k, will then have maintenance at roughly $1000/month. So with 20% down, you’re looking at handing over $100k in cash, getting a $400k mortgage, paying your closing costs (which vary, but let’s say 4% of the purchase price for this example, so another $20 grand), and then need to show about $70-80k more in the bank. This is, of course, after you have an accepted offer, sign contracts, submit a board package that includes such documentation as your past 2-4 years of tax returns, recent bank statements, letters of recommendation, landlord recommendation, employment letters, have your credit and background checks, etc. Oh, AND then you have the interview with the co-op board if they think your application is up to snuff. 

I don’t mean for this to scare anyone off of buying! Honestly, in this city it’s shocking the amount of money and documentation needed simply to rent mean that if you’re in the habit of signing leases rather than just subletting and floating around, buying isn’t all that much crazier. And because co-ops are so strict, during recessions there is very little fluctuation in their values; your asset’s value is pretty protected. There’s a reason all these very wealthy foreign investors have historically and continue to park their cash in the NYC housing market. 

Hope you’re all having a great week, and are getting more sleep than I’ve had the past few days! It’s shocking that this is even remotely coherent.

xo

Anna