Rising co-op prices could alter Sheepshead's character for years to come (Photo courtesy of Lisanne Anderson)
What to do, what to do, what to do? When panic consumes much of the real estate market, many of my clients were still able to find good values for co-ops in Sheepshead Bay. Last week I completed two closings, one for $150,000 for a one bedroom in Gravesend and another for $225,000. You can’t find prices like that in nieghborhoods as good as Sheepshead Bay anymore. However, cue the tax man, because Governor David Paterson now wants to put a mortgage recording tax on co-op purchases.
Let me explain: When one buys a home, let’s say in Midwood, the purchaser will pay anywhere from 2.05 percent to 2.175 percent mortgage tax on the amount of mortgage they take out for the property. That occurs at the closing. However, since co-ops were not considered real property for tax purposes (they were thought of as personal property, more specifically shares in a corporation), co-op purchasers would literally pay a fraction of the closing costs that purchasers of homes and condos would. We’re talking thousands upon thousands of dollars in savings, which is, among other thing, what made co-ops a good value. Now, to close a budget gap (until our next one shortly thereafter) Governor Paterson wants to do away with this exemption. You can imagine that co-op owners and propsective owners aren’t thrilled by this.
Again, let’s say that co-op you want to buy on Emmons Avenue requires you to take out a $300,000 mortgage. Under the current law, you wouldn’t pay a dollar in mortgage taxes at closing. With the proposed changes, you’d have about $6,500 coming out of your pocket at closing, in addition to other closings costs you’d have to pay for.
This hits home even more so for Sheepshead Bay residents because many of the available units in this area are in pre-war buildings that are predominately co-ops. People moved into these places because they coudn’t afford buying a home, and because, for a fraction of the price, they would still have ownership. If this so called “loophole” were closed, it would greatly affect sales on co-ops in Sheepshead Bay. Buyers obviously would factor this fee into the amount they offered for the home, thereby reducing the price of the co-op, and making the neighbor have to do the same thing, and so on and so forth.
While I understand that we’re in the red severely in this state, taking away what amounts to thousands of dollars, and more importantly ownership opportunities in one of the last great middle-class communities left, will hurt us for years to come.
Daniel Gershburg Esq., is a real estate and bankruptcy attorney with offices in Sheepshead Bay and Manhattan. The practice was specifically set up to change the way people view attorneys, by incorporating radical ideas like calling people back quickly, returning emails, giving clients ’round the clock access to their cases and charging low fees. For more information please visit Brooklyn Real Estate Attorney Daniel Gershburg’s website.
Related posts
Print This
- View Comments
- Real Estate
i dont think the tax has that much value in buying a coop. the reason coops are cheaper than condos is the maintenance is higher, you dont own real estate, you are buying into a corp you have no say in(2800 Coyle Street) and depending on whos running the show its harder to get in to. it shouldnt matter if you buy a condo, coop or house you should pay mortgage tax. no one like taxes but if you get a mortgage on a home no matter the type of home you should pay. you say its going to be harder for people to buy with the tax they are going to pay more in 2-3 years of maintenance. also think about the park ave coops and how much money the city can take from them $5 mil mortg = $100,000 tax. but dont worry buyers sellers and lawyers will figure out a way to chisel the broker to make it up.
Daniel,
There are plenty of 1BR coops under 150k in Sheepshead Bay. Run a search on bnymls and you will see. The 2% tax is another great policy idea by Democrats. I would have been a lot more shocked if Paterson proposed a meaningful way to trim fat off the state budget.
I dont agree that someone should pay a Real Estate tax when something is not real estate. The reason co-ops are cheaper is not because maintenance is higher, its because you're buying land interests and not stock interests in a company. Land cannot go bankruptcy, a company can. Land cannot state who will live there, a company can. Many people would buy a co-op, including me, if they had to pay the same closings costs as a home, especially when they have to pay maintenance (and by the way maintenance isn't higher, its non-existent in condos and homes).
if you are getting a mortgage for a loan it should not matter what kind of home it is. how can you say that maintenance is non existent on condos or a house a condo with security a gym and pool and gardens and garbage have to be taken care of someones paying for it. same as a house pay to mow the lawn pay to have the garbage picked up and so on. you are not in the business so you dont know about getting chiseled i wasnt talking about the mortgage broker.
You might find a 1 bedroom coop in the boonies of Sheepshead Bay. You will not find it in the center thats within a walking distance to the train station.
Coops have too many restrictions and that is why I am a condo owner.