This week we welcome HBG team member Kelly Labrecque who has become something of an expert on New York real estate. In this article, Kelly shares insider information and some great tips for researching hard-to-find information about co-op apartments – and apartment owners.
Researching the New York City property assets of our top prospects is no easy feat. Primarily, the difficulty is rooted in one simple fact – more than two-thirds of the residential real estate market in New York City is made up of cooperative apartments, or “co-ops”.
Since co-ops are not subject to the same laws and reporting requirements as condominiums and townhouses, it can be difficult (or even impossible) to confirm a given apartment’s ownership or sale price. For this reason, understanding what makes co-ops different and knowing where to find information is key.
What is a “co-op”?
A cooperative apartment building is owned by a corporation and governed by a board of directors. Famous Manhattan co-op buildings include 740 Park Avenue, 1040 Fifth Avenue, The Beresford, and The San Remo (just to name a few).
Unlike with “fee simple” real estate ownership (e.g. condominiums, townhouses, and single-family homes), co-op buyers purchase shares in the corporation, and in return, are granted the right to occupy a specific apartment. This is called a proprietary lease. As with any other property, the purchase price is determined by the apartment’s size, location, views, and condition.
In order to purchase a co-op apartment in New York City, potential buyers must demonstrate financial liquidity, or “cash on hand.” Some buildings, like 740 Park Avenue, can require liquid assets of up to four times the apartment’s purchase price. Financing is typically capped at between 30% and 75% of the purchase price, depending on the building. The most exclusive and prestigious buildings do not allow financing at all.
Potential buyers must also undergo a rigorous review by the cooperative’s board of directors, which requires the buyer to divulge personal, legal, and financial information. A number of famous people were rejected during the board review process including, Madonna, Barbra Streisand, and Mariah Carey.
In addition to vetting potential buyers, the co-op board also develops and enforces building rules (e.g. what/where you can renovate, if you can sublet your apartment, what types of pets are allowed, etc.), assesses maintenance fees, resolves disputes, and much more.
How do I confirm ownership?
Many researchers use Target Analytics’ ResearchPoint or Lexis Nexis for Development Professionals (LNDP) to find a prospect’s real estate holdings; however, New York co-ops often do not show up in these searches. This is because co-ops do not record deeds or receive traditional property assessments – the two main ways ResearchPoint and LNDP get property data.
Instead of recording a deed, when a co-op is purchased, the owner receives a shares certificate and real property transfer tax (RPTT) is paid to the city. The RPTT document provides you with the grantor/grantee, unit(s) involved in the transaction, and the sales price (based on taxes paid). Unfortunately, the latter is not consistently available until 2006, the year in which new legislation made co-op sales prices public record.
Another way to verify co-op ownership is by searching for Uniform Commercial Code (UCC) financing statements. Instead of a mortgage, the lender will file a UCC financing statement with the county. This statement indicates that a loan has been issued for the property and secures the loan by using the property as collateral in the event of default. The UCC provides you with the name of the debtor, secured party, and the unit(s) involved in the transaction.
Both RPTT documents and UCC financing statements can be found (for free!) at New York’s Automated City Register Information System (ACRIS). This service allows you to search by name and address/unit number (via parcel ID; you can convert addresses here). You can also view PDFs of the document images.
Another tool I use to confirm co-op ownership is PropertyShark (fee-based; limited data is provided for free). You can search by name, address, or assessor’s parcel number for any property in the United States; however, PropertyShark’s specialty is New York City. This tool provides access to RPTT documents, UCC financing statements, building characteristics, and recent sales transactions within the building. It is also great tool for compiling occupant lists for many of the co-op and condo buildings in New York City.
How much is it worth?
If you cannot locate the purchase price for your prospect’s co-op unit OR if the sale took place so long ago that the price has little relevance in today’s real estate market, then comparables are your best friend!
Whenever possible, you should look for a comparable unit in the same building with the same number of rooms and similar square footage. I also like to try to find a comparable with the same unit letter ending (i.e. #2G, #3G, #4G).
My favorite tools for finding comparable co-op sales are City Realty, StreetEasy, and Douglas Elliman. These free websites provide detailed building information, current and past sales, and market trends.
The bottom line
Although searching for information is complicated and often downright frustrating, you don’t have to be a broker or real estate attorney to navigate the world of New York City co-ops. There are a number of wonderful tools at your disposal, most of which are free. You just have to know where to look and be persistent!
I encourage you to follow current New York City real estate trends by reading the Elliman Market Reports, The Real Deal, and Observer Real Estate. It’s important to keep your finger on the pulse of this ever-changing market.
Knowing where to find information about real estate is important for us to get a complete picture of a donor’s financial capacity, and there are lots of sources out there to be found. Don’t forget to talk to your fellow researchers – they are the best resource of all! Most of what I learned about New York City real estate (and research, in general) came from the fantastic mentors and colleagues I’ve had over the years.
To that end, now I’d like to hear from you! What resources do you use to find and value New York City property assets? Do you have any tips or tricks to share?