How to Sell Your NYC Co-op and Buy in the Same Building

It’s a luxury most New Yorkers cannot afford: selling your existing co-op or condo to buy a larger apartment in the same building.

The idea of remaining in the same school district, having the same neighbors and preserving all of the conveniences of your current address while upsizing your living spacing is an attractive proposition to many homeowners in NYC.

And so, if there’s a will, there’s a way, and that’s why it’s fairly common to see NYC homeowners buy and sell while remaining in the same building.

There are a number of factors to consider when upsizing in the same building, including whether or not you need to sell first, co-op board approval, logistical issues, closing costs as well as receiving the green light from a mortgage lender.

Table of Contents:

Do You Need a Sale Contingency?

If you need to use the equity in your current apartment to fund the purchase, your offer will need to include a sale contingency (also known as a Hubbard Contingency). Sale contingencies in NYC are less common given the plethora of qualified buyers who require nothing more than a mortgage contingency, if any contingencies at all.

Because of the additional risk associated with a sale contingency, the vast majority of sellers in NYC are uncomfortable with this contingency. The risk of a seller accepting an offer from a buyer with a sale contingency is especially high if the purchaser needs to sell a co-op apartment, as the sale is subject to board approval.

Most sellers in NYC will only entertain a sale contingency if they have no other offers or if the offer price from a sale-contingent buyer is considerably higher than the offer prices from non-contingent or mortgage-contingent buyers.

Keep in mind that there are varying degrees of risk associated with a sale contingency.

A buyer whose condo is already in contract to an all-cash buyer carries relatively little risk compared to a buyer who needs to sell an expensive co-op in a strict building on 5th Avenue which hasn’t been listed for sale yet.

The length of a sale contingency is subject to negotiation between buyer and seller attorneys. In some instances, a Hubbard Contingency may include an optional extension during which the purchaser is responsible for paying the seller some amount of money each day to defray expenses (i.e carrying costs).

Here is an example of a sale contingency in a co-op purchase contract:

This Contract and the Closing shall be contingent on the sale of a cooperative apartment owned by Purchaser with an address of 458 12th Street, Apt. 4, Brooklyn, NY 11215 (“Apartment 4”) on or before the 90th day from the Delivery Date. 

Purchaser shall send by email to Seller’s attorney, an executed copy of the Contract within five (5) business days after the full execution of the Contract, selling Apartment 4 however failure to provide shall not be a waiver of this contingency by Purchaser. Upon closing the sale of Apartment 4, Purchaser shall submit proof of the consummation of the sale in the form of a copy of a fully executed assignment of the Proprietary Lease attending to Apartment 4. 

In the event that Purchaser has not closed of Apartment 4 on or before the 90th day from the Delivery Date, either party upon seven (7) days’ Notice to the other party and the Escrowee may cancel the Contract whereby the down payment will be returned to Purchaser. 

Notwithstanding the foregoing, Purchaser may extend the time to deliver the copy of the executed Contract for another ninety (90) days (180 days in total from the Delivery Date) to sell Apartment 4 by delivering Notice by email to Seller’s attorney. During the extended second ninety (90) day period, Purchaser shall be required to pay Seller’s $75 per day to defray the costs of the Seller. 

In the event that Purchaser is unable to sell Apartment 4 by the end of the second ninety (90) day period, either party may cancel the Contract whereby Purchaser will receive the return of the down payment minus the Seller’s carrying costs with  no further Contract of Sale existing between the parties. 

The $75 per day of defraying shall begin on the 91st day and end when either party gives notice of cancellation. Any default by Purchaser under the Contract for the sale of Apartment 4 shall be a default under this Contract as well. Purchaser shall make prompt application for a mortgage and be responsible for the extension of any rate locks or extension at Purchaser’s sole cost and expense while waiting for the sale of Apartment 4. 

Closing shall be fourteen days after the date of the proof of the consummation of the sale in the form of a copy of a fully executed assignment of the Proprietary Lease attending to the sale of Apartment 4 to be emailed to Seller’s attorney.

Pro Tip: Estimate your buyer closing costs in NYC with Hauseit’s Interactive Closing Cost Calculator for Buyers.

Will You Meet the Co-op's Financial Requirements?

While it may sound reasonable to assume an easy board approval process if you’ve already been previously approved by the co-op, there are no guarantees when it comes to board approval. This is especially relevant if you’re trying to buy the same building without selling your existing apartment beforehand.

In this scenario, most co-op buildings will require you to meet their Debt-to-Income guidelines factoring in the maintenance and mortgage payments for both apartments even if you plan on selling your existing unit soon after closing.

If you’re upsizing in a co-op and the purchase is sale contingent, you’ll need to meet the co-op’s DTI and Post-Closing Liquidity guidelines based on the carrying costs for the new apartment.

The good news is that many co-op buildings allow existing shareholders (owners) to use an abbreviated board application when applying for a new purchase.

Co-ops will still typically require full financial information, but it’s common for the reference letter requirements to be waived for existing shareholder applicants.

Pro Tip: Estimate your seller closing costs in NYC with Hauseit’s Interactive Closing Cost Calculator for Sellers.

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Are You Prepared for Board Approval Subject to Conditions?

It’s fairly common for co-op boards to stipulate a number of conditions for board approval if you’re purchasing another apartment without selling your existing unit beforehand.

Here is an example of the terms associated with conditional board approval for an existing shareholder who applied to purchase a larger unit in the co-op without selling beforehand:

Considerations when selling your NYC co-op and buying in the same building include board approval, logistics, sale contingency strategy and closing costs.
  • Within 10 business days after closing on Apartment 504, you agree to list Apartment 702 for sale.

  • A $30,000 escrow will be held with the corporation’s lawyer until such time that Apartment 702 has been sold.

  • You will not be permitted to sublet apartment 702 at any time.

  • Apartment 504 will not be eligible for subletting while both apartments are owned by the purchaser.

Pro Tip: Calculate your Mansion Tax bill in NYC using Hauseit’s Interactive Mansion Tax Calculator.

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Is Your Mortgage Lender Onboard?

It’s important to speak with a mortgage lender and request a Pre-Approval letter as you consider the logistics and feasibility of buying a larger apartment. This is especially relevant if you plan on owning both apartments at the same time, as a bank’s down payment, Debt-to-Income and Asset requirements will be stricter if you’re carrying two apartments.

Many large employers offer preferential mortgage rates to employees, so it’s worth exploring if you work for a large company. Furthermore, most major banks offer discounts on the interest rate and origination fees for existing private clients and for prospective clients who agree to move a certain amount of assets over to the lender’s bank prior to closing.

Pro Tip: Estimate the net proceeds from your sale with Hauseit’s Interactive Net Proceeds Calculator.

Are You Comfortable with the Closing Costs?

Buying and selling in NYC is costly from a closing costs perspective. Seller closing costs in NYC are 8% to 10% of the sale price, assuming you’re paying a 6% commission. Buyer closing costs can range anywhere from 2% to 4% or more if you’re buying a sponsor apartment, but they’re closer to 2% for co-op apartments.

Fortunately, there are a number of ways to reduce closing costs when buying and selling in NYC. Sellers can save up to 6% in commissions through an Agent Assisted FSBO, and there’s also a 1% Full Service for sellers who prefer a traditional, full-service agent without the hefty 6% price tag. Buyers can save up to 2% on their purchase by requesting a Hauseit Buyer Closing Credit.

Do You Plan on Renovating?

If you plan on renovating the new apartment, it’s important to think about logistical and quality of life issues when it comes to your sale. Are you comfortable living in an active construction zone? If not, you’ll want to close on your purchase before selling.

Closing on the new apartment before you sell means you’ll have to pay the carrying costs for two apartments while you go through the necessary co-op or condo building approval and DOB approval processes. Keep in mind that it can take two to three months to obtain the necessary approvals before commencing work, and you’ll be paying mortgage and maintenance on two apartments during this waiting period.

One strategy for mitigating carrying costs is to negotiate a sale leaseback with the seller, during which they will rent and remain in the apartment for a few months post-closing. This will allow you to navigate the multi-month approval process while only paying to carry one apartment. When the seller moves out, you can immediately start construction. This strategy minimizes the amount of time you’re paying to carry two apartments.

A Full Service Listing for 1%

Sell your home with a traditional full service listing for just one percent commission.

Posted: 10/24/19

Disclosure: Hauseit® and its affiliates do not provide tax, legal, financial or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, financial or accounting advice. No representation, guarantee or warranty of any kind is made regarding the completeness or accuracy of information provided. Hauseit LLC is a Licensed Real Estate Broker, licensed to do business in New York under license number 10991232340. Principal Office: 148 Lafayette Street, New York, NY 10013.

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