You have finally found “your place to call home” and arrived at an agreed price and been accepted on your purchase of a co-op. You have submitted your offer with your pre-approval from your bank or if cash proof of funds. Some sellers will ask to see your financials prior to going to contract to be confident that you are financially strong enough to pass the co-op board.
Then the contract is made up by the seller’s attorney and sent to the buyer’s attorney for review. Once all the terms are agreed upon by the attorneys and their clients and the final contract is drafted, then the contract is signed first by the buyer and then the seller. All required agency, lead, housing anti-discrimination, and buyer disclosures should also be signed, too, by both parties.
Over the last few years, I have found that some buyers will do an inspection prior to signing their contract to make sure there aren’t any hidden issues with the building structure. Sometimes the buyer’s attorney will ask for the most recent board meeting minutes. Sometimes it will have information about any future capital improvements that might be considered or approved to be completed. This could cause either an assessment or an increase in monthly maintenance. From my experience, management will not email them but will allow minutes to be reviewed in their office by the buyer or his/her attorney.
It is now time to be prepared and gather all your current financials together. Most recent tax returns, W-2s if salaried, or 1099s, if self-employed, bank accounts, all asset accounts, e.g. bonds, stocks, etc. Most items should be noted on your tax returns. The next step is to have your agent email you a sales application that when done will be handed into the management office. It is crucial that you follow the exact directions on the application and proceed with filling it out and answering all the questions in the most accurate fashion.
It is critically important to be an “open book” and disclose all your assets and liabilities. There are times that co-ops can even go so far as to request the IRS to verify your income tax returns by filling out form 4506. They will also ask for personal and business references to ascertain the strength of your character as they know you best as a person.
Most buyers should have sufficient and solid personal and business relationships. Be straightforward, candid, and upfront with your information as it will make your package complete. A few co-ops have switched to an online program that allows all participants in the transaction to fill it out which makes it a more seamless and efficient procedure. This simplifies the process, especially if there are several people and/or family members involved, as it can be forwarded to each individual, as each section is completed, especially if there are several purchasers who reside in different locations.
Co-op applications specifically inquire about your finances as they want you to paint them a picture of how strong a candidate you are. This will allow management and the board to have the most positive opinion and view of you and whoever else is part of the purchasing process. It will make them feel the most comfortable enabling you to pass the management and board review allowing you to purchase.
When filling in the financial data, again it is extremely important to provide all the pertinent information exactly as they are asking for it. Also, by New York State law application fees today can only be a maximum of $20. It is also important to put your packages together in the exact order of the questions asked. It’s prudent to have your agent review your package to make sure everything is done correctly and completed in the proper order. If you need additional help ask your agent.
Then you will need to duplicate as many packages as are required as noted in the instructions. Each completed package should be in individual binders w/color coded tabs to separate each section to make it as easy as possible for the review process for management and the board. The impression and presentation you convey in your packagers are important, but your income, debt/income, and credit are paramount in passing the board. Make sure to add the required checks that will go to the management.
If you have questions, reach out to either your agent or the management company. Their contact info is always on the board sales application. When done, you should either drop off your completed packages in person (or if allowed your agent can assist)so management can go over them or if you are very far away overnight them.
Once reviewed by management and accepted, then they will be sent to the board for their final review. If all is good, management will call to schedule an appointment in the evening for you to meet the board. Once you pass the board, both attorneys have to set up a closing and if financed with a lender and there is a “clear to close” determined by the bank. It is usually within two-plus weeks or less if it is a cash transaction that a closing will occur.
You should ask your attorney about what you will need to bring with you, e.g. certified and regular checks and I.D. A final walk through is scheduled the day of or one day before the closing to make sure everything in the unit is as it was when you last saw it and that the stove, refrigerator, dishwasher, microwave, ACs, washer/dryer or whatever appliances were included function properly (ask about any warranties or paperwork).
The closing should take approximately 1 ½ to 2 ½ hours assuming everyone is on time, all the necessary paperwork and documents are available and completed and the monies from the funding bank are ready. Upon completion, you will get your keys to your new home and don’t forget the mailbox keys, too.
Obviously, there are many facets to buying a co-op, but it is the most cost-effective and economical way for one to purchase in getting a “foot in the door” to become an owner and begin growing your future wealth.
Philip A. Raices is the owner/Broker of Turn Key Real Estate at 3 Grace Ave Suite 180 in Great Neck. For a “FREE” 15-minute consultation, value analysis of your home, or to answer any of your questions or concerns he can be reached by cell: (516) 647-4289 or by email: [email protected] or via https://WWW.Li-RealEstate.Com