When buyers who are searching for a co-op apartment come across a "sponsor unit," such a listing has some benefits and disadvantages not seen in a usual co-op space. NY1's Real Estate reporter Jill Urban filed the following report.
When looking for an apartment in a co-op, finding a listing that says "No Board Approval" means only one thing: it's a sponsor unit, a rare find that could make a big difference for some buyers.
"A sponsor unit is an apartment that is owned by the original developers or corporation that turns a rental building into a cooperative," says Jill Sloane, an executive vice president of Halstead Property. "And as these apartments have been rented for many years, when they come up, the sponsor had the right to continue renting or sell it."
Sloane says there are some advantages and disadvantages to buying a sponsor apartment. The first big pro is any buyer who can afford it can buy it. There is no board approval process, and buyers cannot be turned down.
"This is good for someone who is either self-employed, possibly unemployed, someone who has cash in the bank but may not get through a board, and of course parents purchasing for children, which the building may not allow," Sloane says.
While most co-ops require anywhere from 25 percent to even 50 percent down, sponsor unit down payments can be negotiated.
Often times, sponsors can offer a unit at two different prices &mdash: an un-renovated, "as is" price, or, if the owner does the renovation, the cost could be added to the sale price. Buyers often don't get much say in the style of the renovation, but they do avoid a lot of hassle.
"The beauty of this is that you are actually paying for the renovation in your mortgage, and you're not closing on the apartment and then getting approvals and then picking everything out and then starting your construction, which takes months," Sloane says. "And you're also not paying for two apartments at once."
One downside of sponsor units is they generally cost a little more, because there is a premium for avoiding the board approval process. It could also cost more at the closing table because the sponsor can ask the buyer to pay the transfer taxes and even attorney fees.
Sponsor units are rare finds, and when they show up on the market, they can be one-of-a-kind opportunities for buyers.