According to Paragraph 6 of the Contract of Sale, co-op apartment transactions are “subject to the unconditional consent of the Corporation.” By contractual agreement, purchasers are required to submit their application and all supporting documentation within 10 business days after the delivery of a fully executed contract of sale. But how, in the light of the growing number of board rejections, do buyers ensure that their co-op purchases will be approved and will conclude ultimately in a successful closing?
The advice to the buyer is simple: choose a broker who is experienced, smart, diligent and detail oriented. Then listen to him or her. Your broker will guide you through the intrusive process and present you to your best advantage. If your board package lacks substance, is difficult to understand, or raises unanswered questions, then you may not be invited for an interview. Generally, when a board intends to reject a candidate, it does not grant a personal interview. Since boards are not required to give reasons for turning down an applicant, it behooves the broker and the buyer to do everything they can to stack the cards in their favor—which means providing the best package possible and putting the most conservative foot forward in the interview that follows.
The board package should tell a story that is uniquely the buyer’s own. Letters should be specific. Social letters should talk about the purchaser’s background and education, charitable, club and leisure interests. These letters should highlight accomplishments and show the buyer’s character.
While board requirements vary from building to building, and only a handful have formulas for minimum income and assets, all co-ops look for good credit and consistent employment history. Financial statements should be presented clearly and concisely. The lowest common denominator should be considered, so the financial statement can be understood by the least sophisticated reader. Anything complicated should be simplified; anything out of the ordinary should be addressed up front. If there is financing, loan application numbers should match those on a net worth statement. If your broker has questions, these should be cleared up or addressed in a cover letter. Requests for more information from the board breed negativism, and when this happens, the spiral almost always moves downward, not upward.
All financial entries must be documented with bank or brokerage statements, real estate appraisals or opinion letters. When a business represents a large part of the purchaser’s assets, then an audited statement or corporate tax return is required. Additionally, an accountant’s letter can explain a family owned enterprise or how a business is valued. Similarly, if a loss is carried over on tax returns, reasonable explanations should be provided to allay misgivings of low numbers from buyers claiming high incomes. Boards can be suspicious of high assets with low income, and, conversely, of high income with low assets. If there’s a trust fund, the administrator should quantify whether there’s easy access to the funds. Any outstanding credit card balances can be explained in a cover letter from the buyer. If an applicant’s income is suspected to be insufficient, and if the board permits, a parent might act as guarantor for the maintenance, but then two sets of financials must be presented to the board. Alternatively, a parent can write a gift letter and offer to put a year of maintenance in escrow as security against a default in the maintenance. If there’s a past or current lawsuit pending, a reasonable explanation might prevent the board from thinking you’re litigious and turning you down.