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.