Q & A with Dottie: Why do Condos Sell for more than Co-Ops?

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Q:  Why do condos sell for more than co-ops?

A:  If a co-op and condo apartment have identical interior and exterior amenities and the only difference was their property type, the condo would sell for more.  In a co-op, the board has more control over your rights as a homeowner than a condo association and therefore more restrictions, which causes condos to achieve higher prices.  Manhattan has, for example, three times as many co-ops as condos.  This does not mean that one type is better than another, just different.

Q: As a first time buyer, I'm looking for a co-op in Manhattan.  I have a good job but haven't saved enough for a 20% down payment. Are co-op boards negotiable about the amount I would be required to put down?

A: In Manhattan, the average down payment for a co-op is 35% but there are many co-ops that will allow 20%, especially those in buildings with a lot of starter apartments such as studios and 1-bedrooms.  While it is possible for a board to make an exception, it is rare to see a co-op require less than 20% as a down payment.

Q: Are mortgage rates on the rise? My husband and I are trying to decide if now is the time for us to buy or if we can wait a little longer.

A: The answer to that question can change based on the weekly economic data. On July 30th, the GDP report was very positive showing 4% growth in the US economy in the second quarter.  This type of positive economic data has a negative effect on interest rates. The Federal Reserve is also reducing its Treasury Bond and Mortgage Backed Securities purchases on a monthly basis, along with the possibility of more positive economic data in the near future, then most likely rates will rise. 

Q: My parents are getting older, and are having trouble paying their bills, etc. Would a reverse mortgage be beneficial to them? How do we know if they should go down that path?

A: Many lenders utilize reverse mortgage specialists to determine the benefits for an individual 62 and older to see if they will qualify. HUD offers counseling to senior citizens as well so that they understand the pros and cons of a reverse mortgage.  The senior citizen is still responsible for taxes and insurance and maintaining the property.  If you are not living in the property for more than 12 months, perhaps in a nursing home, the loan becomes due.  I would recommend that the individuals sit down with a reverse mortgage specialist and review the closing costs, the monthly cash flow it will create and the other requirements of the reverse mortgage before deciding if it's for them.