What IS a 'Sponsor Unit'?

By Mark Hopkins; Mortgage Loan Originator and Finance Expert Based in NYC

If you’re searching for an apartment, especially in areas such as Hudson Yards, Harlem and The Heights in Manhattan, DUMBO or Downtown Brooklyn and even Greenpoint in Brooklyn, you’re likely going to come across and be wowed by some of the gorgeous and state-of-the-art new developments going up in these neighborhoods. Many times since these units are being sold directly by the builder, and their motivation is to have the building sold and occupied as quickly, these units will be offered below market value, and since they are new and fully renovated, they will appreciate at a higher value. What could be better?

For the Sponsor (unlike a homeowner who might have some sentimental attachment to what they’re selling) this is purely a business transaction. In most cases the sponsor will look to have the buyer cover closing costs typically paid by the seller in a resale. Chief among these costs is New York City’s seller’s transfer tax, which is equal to tax is 2.895% of the SELLING price for the unit. In addition to this tax, they will also have you pay the seller’s attorney fees and any other processing fees they can think to throw in. Thus on a unit with a $500k listing price the seller/sponsor will be asking you to pay $10k in transfer tax and probably $5k or so in fees for the sponsor’s attorney and additional costs. Your closing costs can quickly double over what they would be when purchasing a unit being sold by an individual owner.

Knowledge is power when going into any new venture and purchasing your first apartment is no different, and your greatest asset through this exciting process will be the team of professionals you entrust to guide you. It all begins with your real estate agent, as the right realtor will not only be able to get you access to these competitive and exclusive listings, but they will know how to structure your offer to get the best possible price and ensure a smooth process. A reputable and experienced realtor will also serve as a conduit to other professionals, such as a trusted loan officer/lender and attorney, along with inspectors, insurance agents, and even contractors for post-closing renovation.

Mark Hopkins

Senior Loan Officer | 1483657

Cliffco Mortgage Bankers | NMLS #65328

9016 3rd Ave. Brooklyn, NY, 11209

o: 516.408.7300 | m: 631.560.0555