It’s hardly a new phenomenon, and it surfaces more frequently when markets cycle down. It’s not easy to prove, so it rarely gets challenged in court. Still, it’s pervasive. One lender I work with says he’s seen more examples in the past 18 months than in his 13-year career. Most attorneys don’t like it. Appraisers call it unethical. Co-op board members say it benefits shareholders because it protects value.

But does it?

What do you think? Is it a service or a disservice to co-op shareholders when boards reject a sale solely because they believe the contract price is too low? And if a board’s pricing threshold is known, is it ethical for the parties to “meet it” by inflating the price on paper through a seller credit to the buyer?

Thankfully, this isn’t widespread among most co-ops, although it is common practice among developers who offer “decorator allowances,” cover transfer taxes and other buyer costs to preserve their published Schedule A pricing.




Here are a few concerns worth considering:

  • When a seller provides a credit to a buyer at closing, it effectively “grosses up” the sale price—distorting the public record. No one outside the deal knows that concessions were made.

  • If a lender is involved, the credit can’t exceed 6%, or the loan could be jeopardized.

  • Appraiser Jonathan Miller has called this out in his Housing Notes from 9/24/24: “The sale at the inflated price goes into the public record and is subsequently used as a comp in the marketplace, perpetuating the false value…. These co-op boards think they are protecting their values when, in reality, the brokerage community talks about bad board behavior among themselves, which reduces buyer traffic in these particular buildings, ultimately damaging the market value.”

  • There are buildings where this kind of pricing interference is systemic—and many agents simply avoid them.

  • During the post-COVID recovery, I reached out to Michael Vargas, President of Vanderbilt Appraisal, for his take. His warning: boards that try to "protect value" by rejecting arm’s-length deals often wind up damaging it. Some have even faced legal action for overstepping.

“Mandating artificially inflated
closing prices is a form of
price manipulation.”

Mandating artificially inflated closing prices through back-door credits is misguided and does long-term harm. It distorts comparables, undermines the transparency that brokers and lenders rely on, and ultimately misleads both buyers and sellers. It’s a form of price manipulation.

Recently, I spoke with a partner at a respected transactional firm who is drafting legislation that would require boards to disclose any minimum price thresholds. That sounds reasonable. But if there is a threshold, shouldn’t it be grounded in current market data—like recent comps and the apartment’s actual condition?

In my view, threshold pricing disrupts market dynamics, compromises transparency, tarnishes a building’s reputation, and does long-term harm to shareholder equity—especially in a soft market.

Are you thinking about selling but are unsure how your board may weigh in? I’d be happy to share what I know. Give me a call.