sponsor unit

$23,428

I mean % wise.

Take $23,428 away from the other unit, then divide that by the sponsor unit.

Should the sponsor unit price like a condo? Will the new owner be subject to the co-op rules going forward? For example, if the new owner wants to sell the apartment in the future, the co-op board will have to approve it right?

1) Yes / Difference is the Sponsor will pass on the 1.875 City and state transfer taxes that a seller pays in a resale. The Sponsor unit will be more expensive in closing costs that can be negotiated. Still you will end up at the same net price of purchase and closing costs. If he/she negotiates with you on the cc's then they will be less flexible on the price and vice versa.

2) With a Sponsor unit you almost always never have to do a board interview when you purchase and sometimes you're lucky enough not to have to submit a package BUT once you purchase into the Co-op you are subject to all the Co-op rules moving forward. And yes, if you resold it you would have to prospective buyer would have to get the co-op boards approval.

In general, Co-ops have different by laws given the nature of the ownership so although the aforementioned is probably the case and the general information on co-ops, you or your broker if you have one needs to review the co-op by laws as well as speak with the management company to verify the policy after purchase.

Thanks BradC. Can you please clarify about the point of closing costs? From buyer's perspective, will the closing cost of buying a sponsor unit be higher than a regular co-op unit?

My pleasure.

The closing costs for the sponsor unit will be higher then those of a regular resale. The reason is the Sponsor will pass on 2 closing costs :

1)City transfer taxes
2)State transfer taxes

- The sum of both is 1.875% of the sales price.

In a regular resale(a resale is a sale from one individual owner to a buyer versus a sponsor sale which is a sale from the developer of a new development or the sponsor of a pre-war), the owner of the apartment will pay the city and state transfer taxes. So when negotiating with a Sponsor you need to keep that 1.875% of sale price in mind. In conclusion, if the Sponsor unit and regular resale were identical and sold for the same price, your total net cost(including closing costs) will be higher for the Sponsor unit because the Sponsor(unless negotiated) will pass on the 1.825%(of sales price) city and state transfer taxes that the owner of the regular resale will pay. Make sense?

Feel free to call me at 212-203-1812 or email me at bchristi@demskerrealty.com if you want to have a private conversation.

will be higher as you will be paying the state and city taxes for the sponsor. over $500K it's approx 2%.

once you're in a coop, you're treated the same way as other owners. unless you are buying with sponsor rights and use it as an investment property.

Thanks BradC for the clarification. Besides the co-op board approval, it might make more economic sense to buy the regular unit.

Thanks ab-11218. Also, the sponsor unit is priced above $1 million and the regular unit is priced way well below $1 million. I guess there's also the 1% mansion tax to be considered.

so you need to do the price diff between 2 apartments and then add 3% to that.

most of the sponsor renovations that i've seen, even the "high-end" ones, are done on the cheap. they typicall don't last as long as the ones done by owners.

The transfer taxes above $500k are 1.425% to New York State and 0.4% to New York City. S,o yes approximately 2% but exactly 1.875%. For a commercial unit the New York State rate increases to 2.625% and the City rate remains 0.4%.

You will also have to pay the 1% mansion tax, absolutely.

If there's a reason why the sponsor unit is worth more then the resale then the cause justifies the means IF you like the finishes, etc. On the other hand, you don't want to get ripped off either so if you're comparing apples to apples then go for the resale.

Keep in mind that sponsor renos are rarely top-tier. Actually--closer to never. So the unit may look nice at first glance but you'll likely want to upgrade the cheap materials typically used by sponsors.

The sponor unit does look spectacular because everything from top to bottom is brand new. There are lots of built-in cabintry too. I can't tell if the kitchen cabinet is from IKEA or not though.

Have you seen it in person?

Not yet. Just saw pics online. Will check out OH this weekend.

You should be able to tell when you see it in person. The weight of the doors as well as the quality throughout each square inch of every cabinet. What are the appliances?

To elaborate a little on the cabinets and to finish that thought - the weight, if wood, should be somewhat heavy because the front panels should be made from solid wood. Also, draws should be cut from a single piece of solid wood as well. Where two pieces of wood meet, you shouldn't be able to tell. The wood used on the face of a quality cabinet shouldn't have knots, pitch pockets, sanding scars, grain irregularities or color differences either.

If they are not wood cabinets, just ask the sales rep. who represents the sponsor what they are.

>>Not yet. Just saw pics online. Will check out OH this weekend.<<

They always look good in photos. Reality doesn't always measure up. Of course some buyers are fine with a sponsor reno, as everything generally 'works' and it's always possible to upgrade somewhere down the line.

What's the issue? If the sponsor didn't use Ikea cabinets, pull down what he used and put the Ikea cabinets of your choice up. They're very reasonably priced.

What about the differences in the floors each unit is located on (ie. floor 10 versus 2)? That will also cause the pricing to be somewhat different...

That's true. Floors are priced out 2 ways on

1) A floor by floor basis
2) A gap basis

If you're comparing a 1 bedroom on the 2nd Floor with a 1 bedroom on the 25th Floor, you can't do a price adjustment on a floor by floor basis for 23 floors because the market can't absorb that. For example, if you figure a there is a $20k price adjustment on a floor by floor basis in this building, that would mean without even looking in the interior of the apartment on the 25th floor it's already worth $460k more then the unit on the 2nd floor...it doesn't work. In this case you would do a gap price adjustment. Floors 2-7 have a value range of 'x,' while units 8-15have a valuation range of 'y' and etc. Within the ranges the value increases slightly but in general an apartment in the same line that's 2 floors higher or 2 floors lower will almost have no change in price. The views will most likely be the same and the apartments will almost be identical. However, if on the 9th floor you face a building and on the 10th the views are un-obstructed then that's a different story. Then price increases more but that's on a case by case basis.

The only time a floor by floor basis versus a gap basis is used low-rise to mid-rise(8 floors) and especially with full floor loft buildings. There's more value on the 3rd floor then the 2nd...always.

"There's more value on the 3rd floor then the 2nd...always." - That's in reference to a full floor loft building.

I see what you mean. I rented a sponsor unit many years ago. I just got out of college so I thought it was a great apt compared to other run down apts. Everything was white. It gave you an impression of new. The material was good enough for me at that time.

When I did my appraisal years ago, I remembered the appraiser simply applied a $5000 (or maybe $10,000) price difference on each floor when compared to similar units in other buildings.

That's it. At the end of the day, the value of a property is what someone is willing to pay for it. In my professional experience, there's a strategic way to negotiate. The fact a property is priced realistically out the gate and that there are comps to justify that it's worth time to start negotiating is enough to begin but getting the other party to see what you see is tough or was tough for me when I was doing it for my home condo. As a buyer, emotionally it's tough to stay the course and play a winning hand because of the perception of losing the apartment. At some point, you say enough of this back and forth here's the deal. But as a broker, I there is a process that I follow that and because my ultimate goal is to make my client happy and a repeat client, I'm able to stand the course and negotiate favorable terms without the anxiety of losing the apartment. From my experience and the confidence I have, I know that if I get them down to 'x' and that's the lowest they will go then that's up to my client to either take it or leave it or come back to the table with another counter. At that point it just isn't meant to be. But my initiative and emotional sense of the deal is attached to making them happy which is directly correlated to getting a price they want. So, that type of symbiotic relationship in my opinion is good because it takes the buyer out of a conflict of interest when trying to negotiate and stand firm on pricing that is lower then the asking but justified in their eyes. As I said, of course I have steps that I follow and ways I know how to test the other party and see where their bottom line really is.

Thanks for all the valuable info. I understand that it's not exact science. Just looking for general guidance. Thanks again.

Absolutely, my pleasure. Let me know if there's anything else I can do. Good Luck!

>At the end of the day, the value of a property is what someone is willing to pay for it.

To the seller, that's true. To the buyer, it's what the next highest bid is.

Lets agree to disagree