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Buyers Repelled by Co-op Application Process Drive Down Sales, Experts Say

By Shaye Weaver | February 3, 2017 11:57am | Updated on February 6, 2017 7:27am
 A co-op at 893 Park Ave.
A co-op at 893 Park Ave.
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DNAinfo/Shaye Weaver

UPPER EAST SIDE — Co-op sales and prices on the Upper East Side took a dip in the last quarter of 2016 due to increased demand from first-time buyers who were then turned off by the arduous co-op application process, experts said.

Co-op sales fell 17 percent, from 503 deals during the last quarter of 2015 to 417 in the same period in 2016, and the average price for a co-op in the neighborhood dropped by two percent to $1,591,000, according a recent report by the Real Estate Board of New York.

The dip is circumstantial though and the numbers are expected to go back up with the end of the election and the opening of the Second Avenue Subway, according to Corinne Pulitzer, an agent for Douglas Elliman who specializes in deals on the Upper East Side.

Many first-time buyers were scared off by the "onerous" co-op application process and opted instead for condos or other options, Pulitzer said.

"First-time buyers are just getting to know the market, and getting qualified for co-ops is a huge challenge because bank-worthy is not co-op worthy," Pulitzer told DNAinfo New York on Tuesday.

"They do look to the Upper East Side and love the apartments but a lot of the co-ops have a very onerous formula for buyers and they don’t meet that criteria... A lot don't allow [purchasing with a guarantor or parent]."

Co-ops — apartment buildings that give each resident an interest in the entire building and a lease/contract/stock share enabling the owner to live in a unit — are getting more difficult to apply to as co-op boards continue to ramp up vetting efforts, according to Pulitzer.

"If a young person is just starting their career and they don’t have a history, the concern is if they lose their job, who will pay the maintenance and mortgage?" she said.

One co-op on the Upper East Side requires a list of the purchaser's liquid assets and for the buyer to have a gross annual income equal or greater to 40 times the sum of their monthly debt.

"Co-ops come with a lot of baggage, which is why tenants need deeper pockets," Pulitzer said.

"They require very qualified people who are employed, have experience and good credit. If they do, they will have no problem and will love living in a good co-op."

Another reason for the dip could simply be that there aren't many co-ops in the neighborhood, and the ones that exist are competing with new condos and apartment buildings with all the "bells and whistles."

But now that the election is over, the market is in a good place and buyers' confidence is on the up, Pulitzer said. Plus, the Second Avenue Subway is bringing back activity that will likely result in a rise in co-op prices.

"I see the light at the end of the tunnel now that construction is gone,"  she said.

"I sold a multi-million-dollar apartment close by and, when I first spoke with the seller, I advised them to wait until construction was over. We got a million dollars more because [the construction had been] such a turn-off."