What is a Sponsor unit?

A sponsor unit is an apartment that the original developer or builder owns or sells. In brand-new ventures, the developer is frequently the sponsor. The sponsor is the original owner of the building's unsold shares in co-ops.

It's the first time the house has ever been offered for sale, even if the apartment may have been rented out in the past.

Purchasing a sponsor unit does not require board approval.

The primary benefit of purchasing a sponsor unit is avoiding the difficult process of getting accepted by a co-op board. There are no criteria for post-closing liquidity, no board interviews, and no hoops to go through. You can buy the house as long as you can show that you can afford it.

This not only allows for significantly quicker closings than with a regular co-op unit, but it also gives those who wouldn't have been able to meet the co-op board's strict cash-on-hand requirements the chance to purchase a house.

Buyers of condos and new construction can anticipate that their sponsor unit will be completely new. Just wait until you smell a new apartment if you enjoy the scent of a new car. Being the first person to live in an apartment is quite comforting. Without blemishes, stains, or traces of others who came before, it is a clean slate ready for you to personalize.

Higher closing charges apply to sponsor units.

Sponsor units do not require the time-consuming co-op approval process, but buyers must factor in higher fees for closing charges. Transfer taxes must be paid by purchasers of sponsor units, same like for new construction. Those making a purchase in NYC should allocate money for both local and state transfer taxes. Additionally, buyers might be responsible for paying the sponsor's lawyer. To negotiate a transaction that benefits both parties, work with a buyer's agent.

Other negative aspects of buying a sponsor unit

When buying a sponsor unit, there are a few additional factors to take into account in addition to higher closing costs:

Rental revenue isn't assured: If you purchase a co-op apartment, you might not be permitted to rent it out. The co-op board's regulations nevertheless apply to buyers even though the board approval process is circumvented. You won't be allowed to use the unit as a rental source of income if the co-op prohibits rentals or sublets.

Possible "as is" sale of apartment Co-op sponsor units are frequently in their original state, which is not a problem for condos or brand-new construction. Expect to either fall in love with its vintage charm or remodel it to bring it up to current.