When a Co-op is not cooperative?
A: If your co-op board has rejected your buyer, there is unfortunately not a lot you can do about it. I have seen on occasion buyers resubmitting information to the coop boards through their attorney, but it is rare that a board will reconsider their decisions. The best thing that you can do is pre-qualify your buyers. Don't be willing to accept an offer from a buyer based on the monetary offer alone.
Here are a few general tips to use when prequalifying buyers.
1. Debt/Income Ratio: Monthly mortgage and maint. payments should not exceed 25% their income. For stricter co-op boards I would also consider: mort. + maint. + current debts to not exceed 25% of monthly income.
2. Mortgage Pre-Approval Letter: Be sure to get the loan pre-approval from the applicant's mortgage broker and review loan conditions required for approval. Also, just because it's a cash deal doesn't necessarily mean it's a done deal.
3. Tax Returns: Review their past 2 years tax returns and measure their income according to the Adjusted Gross.
4. Employment History/Salary: Look for solid work history and consistency of income. Also pay attention to the type of job and consider that their income may fluctuate with the industry in which they work.
5. Liquid Assets After Closing: As a general rule I would look for 2 years worth of monthly mortgage and maintenance payments LIQUID AFTER CLOSING. This may vary from building to building; some will allow less and others may require substantially more assets to be available after closing.
6. Gifting Money: Are the applicants being gifted money? If so, be sure to include the proper tax documents (Gift Letter) that were used for by your accountant.
7. Gaurantor Needed: Does the applicant need a guarantor? Be sure to check with the managing agent first to make sure the board will allow it.
8. Pied-a-terres/Pets: Pied-a-terres and pets (be sure to ask how many, breed and the weight) also must be permitted by building rules.
9. Credit Score: Review the applicant's credit report for major red flags. You can obtain a copy of the credit score/report from the buyer's Real Estate Broker or the buyer's Mortgage Professional.
The requirements of a co-op board for transactions amongst shareholders varies from building to building. As the seller, you better be sure to fully understand what your board requires for approval BEFORE you accept any offer. Its not just the highest offer, it's also the best qualified offer! No one wants a board turndown.
Comments (3)
Question: Why would pied-a-terres not be allowed? Seems like this type of owner would promote a quieter building and minimize use of common facilities, no?
Posted by Veronica Fraga | February 16, 2007 9:52 PM
If our buyer meets all financial criteria, can the coop board reject our buyer if the board doesn't like me personally? People have told me that this is often the case. If so, what recourse do I have, short of exploding?
Posted by florence link | May 31, 2007 9:46 PM
A unit which is adjoining my apt as well as another apt in the co-op came up for sale, first to the two adjoining owners. Both of us made the exact same offer, full price, cash (according to the managing company's attorney laison). My offer was not accepted as the other owner offered more money for a portion of the hallway which adjoins both our units. I had planned to make an offer for a portion of the hallway after and if my purchase offer was accepted - nothing was ever stated about any additional space being available - the apartment was being offered 'as is.'
all this came about after I made my offer as the other person was present (she does NOT live in the unit, which is a requirement but obviously the Board does not care as long as she promises to move into the unit at closing) the next morning at 7 AM looking at the apartment for purchase (saw and heard her) - I am quite sure that she knew I had made a good offer and therefore she went for the additional property. I found out about this through MY calling the management co. attorney who said he had just received her signed contract 15 minutes prior to my call to him.
something seems a little fishy to me...any opinions out there and do I have grounds for any type of case? thanks
Posted by Ellen Krainik | June 13, 2007 5:38 PM