55 Eastern Parkway #2B
From time to time, sponsor units come on the market. But what is a sponsor unit? The short answer is that it is a unit that has never been sold.
In most cases, sponsor units are found in new condos. In this instance, the units are being sold by the condo developer. The main advantage of buying a sponsor unit from a developer is that you’re buying a new unit that has never been marred by another tenant’s wear and tear. While deals can be had, especially when supply outpaces demand, buyers must be prepared to absorb higher closing costs, including state and city transfer taxes.
In rare cases, it is also possible to buy a sponsor unit in a coop. Sometimes, it is even possible to buy a sponsor unit in a pre-war coop. In this instance, the unit is either being sold by the coop’s original sponsor or, in the case of a pre-war coop, by the person or entity who inherited the original sponsor’s units. This unique situation comes with many notable advantages and a few disadvantages.
In most cases, sponsor units are found in new condos. In this instance, the units are being sold by the condo developer. The main advantage of buying a sponsor unit from a developer is that you’re buying a new unit that has never been marred by another tenant’s wear and tear. While deals can be had, especially when supply outpaces demand, buyers must be prepared to absorb higher closing costs, including state and city transfer taxes.
In rare cases, it is also possible to buy a sponsor unit in a coop. Sometimes, it is even possible to buy a sponsor unit in a pre-war coop. In this instance, the unit is either being sold by the coop’s original sponsor or, in the case of a pre-war coop, by the person or entity who inherited the original sponsor’s units. This unique situation comes with many notable advantages and a few disadvantages.
In this article:
The Pros of Buying a Sponsor Unit in a Coop
Purchasing a sponsor unit in a coop is desirable for two key reasons: there is greater room to negotiate, and buyers can skip the board approval process.
On the negotiation side, sponsor units are not subject to the coop board’s financial requirements. This means that there can be more room to close a deal under different conditions (e.g., with higher than average financing or no Escrow). This isn’t to say that sponsors don’t look at one’s credit worthiness. They simply aren’t obliged to follow the same rules applied to other coop buyers. For someone who needs to enter a deal with lower money down or can’t make the Escrow requirements imposed by many coop boards, a sponsor unit can be a great way to walk through an otherwise closed door.
On the negotiation side, sponsor units are not subject to the coop board’s financial requirements. This means that there can be more room to close a deal under different conditions (e.g., with higher than average financing or no Escrow). This isn’t to say that sponsors don’t look at one’s credit worthiness. They simply aren’t obliged to follow the same rules applied to other coop buyers. For someone who needs to enter a deal with lower money down or can’t make the Escrow requirements imposed by many coop boards, a sponsor unit can be a great way to walk through an otherwise closed door.
Another notable advantage of purchasing a sponsor unit in a coop is that sponsor unit sales by-pass the coop board approval process. This means that while the buyer will be a shareholder in the coop with all the same rights and responsibilities, they will never be asked to undergo the agonizing experience of having everything from their finances to personal hobbies to pets assessed and scrutinized by their future neighbors. Given how invasive coop interviews can be, this itself makes sponsor units highly attractive.
View from roof deck at 2 Grace Court
The Cons of Buying a Sponsor Unit in a Coop
Despite the flexible financing and ability to bypass the board approval process, sponsor units do come with their own potential challenges.
If you discover a sponsor unit in a coop, unless the sponsor has already done a renovation before listing the unit, you’ll likely be looking at a unit in “vintage” or estate condition. While this may offer a lot of charm (e.g., original crown moldings and fixtures), it may also mean that the unit hasn’t been renovated in decades, if at all. In this case, the unit may require a complete gut renovation before it is livable.
If you discover a sponsor unit in a coop, unless the sponsor has already done a renovation before listing the unit, you’ll likely be looking at a unit in “vintage” or estate condition. While this may offer a lot of charm (e.g., original crown moldings and fixtures), it may also mean that the unit hasn’t been renovated in decades, if at all. In this case, the unit may require a complete gut renovation before it is livable.
Buyers of sponsor units are also strongly advised to investigate the unit’s past tenancy. If it is coming on the market for the first time in decades, it was likely a rent-controlled or rent-stabilized apartment. As part of one’s due diligence, it is important to research the property’s history to ensure that the tenants were not forced out of the unit under questionable or illegal conditions.
Another disadvantage of buying a sponsor unit is cost. Because sponsor units come with a few notable advantages (namely, less scrutiny of one’s finances and personal affairs), they tend to be in high demand. This means they often sell for more than other units in the same coop. In addition, sponsor units in coops, like those in new condos, nearly always come with additional closing costs.
Another disadvantage of buying a sponsor unit is cost. Because sponsor units come with a few notable advantages (namely, less scrutiny of one’s finances and personal affairs), they tend to be in high demand. This means they often sell for more than other units in the same coop. In addition, sponsor units in coops, like those in new condos, nearly always come with additional closing costs.
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New and notable sponsor co-op listings
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Tudor Tower, #508 (Compass)
Skyview on Hudson, #3X (KW L'AGENCE)
Leslie House, #2C (Douglas Elliman Real Estate)
The Pinehurst, #55 (Time Equities Inc)
55 Eastern Parkway, #2B (Corcoran Group)
Chelsea Arms, #5H (Buchbinder & Warren Realty Group LLC)
Chelsea Court Tower, #6C (RACHEL REALTY NYC INC)
The Creston, #3A (Corcoran Group)
The Bancroft, #115 (Corcoran Group)
Would you like to tour any of these properties?
Just complete the info below.
Or call us at (212) 755-5544
Would you like to tour any of these properties?
Contributing Writer
Cait Etherington
Cait Etherington has over twenty years of experience working as a journalist and communications consultant. Her articles and reviews have been published in newspapers and magazines across the United States and internationally. An experienced financial writer, Cait is committed to exposing the human side of stories about contemporary business, banking and workplace relations. She also enjoys writing about trends, lifestyles and real estate in New York City where she lives with her family in a cozy apartment on the twentieth floor of a Manhattan high rise.
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