CoopAndCondo.com - Addressing the realities of Residential Real Estate

Brokers and Board Packages

       

August 21, 2010

Standard Operating Procedure

Those of us in the biz know the drill. Once an offer is accepted, the buyer goes about the process of putting together his or her “Board Package.” The purchase application, together with tax returns, copies of brokerage account statements, personal and business references, credit report authorizations and other personal data are assembled for perusal by the seller’s broker before submission of the whole enchilada to the managing agent for the co-op or condo. Well, what happens if the buyer wants to submit his or her application directly to the managing agent without prior review by the seller’s broker, or the buyer’s broker, for that matter?

Upsetting the Proverbial Apple Cart

As it turns out, nothing. There is no requirement in the standard form co-op or condo contract that obligates a buyer to submit documents to the seller’s broker for review prior to submission to the managing agent.

Although the exercise is time tested and usually works well, particularly for first time buyers whose personal and business reference letters can often seem like postcards from camp, the buyer is under no obligation to allow the seller’s broker to review the package before it’s submitted. Ouch. But wait a minute, what if the buyer is much more sophisticated, or famous, or has serious privacy concerns, perhaps submitting the package directly to the managing agent is a good way to preserve confidentiality, particularly if it’s a fancy shmancy Board package of a high profile buyer. Then again, maybe not.

Connecting the Dots…

Many times offers are accepted based upon the review by the broker of the initial financial information provided by the buyer, to insure that the buyer actually has the financial wherewithal to purchase the apartment and the appropriate social and business pedigree for the particular building, in the case of a co-op. Sometimes the buyer’s presentation when the offer is made, does not match up with the actual disclosures in the formal Board Package. In some cases, those missteps are minor and the brokers can still put the information in the best light. In other situations, there are out and out misrepresentations that were made at the time of the offer’s acceptance and the candidate has no shot of being approved by the Board (and may run the risk of losing his or her deposit).

Unless the brokers have the opportunity to review the Board package in advance, there is no way of telling until it’s too late, that someone has misstated his or her profile, thereby resulting in a significant waste of time and effort.

The Inexperienced Buyer

In other cases, the buyer’s information is accurate, but the initial submission is chaotic, embarrassingly inadequate or out of touch with New York optics. Allowing the brokers to review the package usually insures that the buyer’s pluses and minuses will be organized for maximum or minimum impact, as the case may be.

But Interest and Ability Can Vary Greatly

The above being said, sometimes the seller’s broker is not cooperative or responsive, makes inappropriate demands or comments or is simply intent on coasting all the way to the closing, once the offer is accepted. When that happens, submitting the package directly to the managing agent may actually be a good idea. In almost all cases, however, the broker-added gloss to the Board package serves the interests of the parties and is the best way to handle submission of the documents.

As Seen on TV

I relate the above not as a hypothetical, but based upon a conversation I had recently, where the phenomenon of refusing to allow the seller’s broker prior review of the Board Package occurred on more than one occasion. Could downsizing and diminished net worth be causing potential buyers to exaggerate their status when offers are made, to be followed by a retreat of necessity when applications are actually submitted?

Residential Reality: Add Broker Review to the Contract

One important remedy is to discuss privacy and disclosure concerns as soon as possible after the offer is accepted. A better solution is to eliminate the buyer’s possible refusal to allow review of the Board package prior to submission by contractually requiring review by the brokers in the co-op or condo contract. In most cases, the buyer’s attorney will not object to this standard operating procedure. If an objection is raised, it is an opportunity for the seller to reconsider whether he or she has accepted the right offer.

Thanks: To Malcolm Carter, for posting a version of this article earlier this month on his "service you can trust" blog.

Be cautious with out-of-state banks and Internet lenders...

Asked and Answered

Q

I don’t smoke, but the smell of smoke is wafting into my apartment from my neighbor. Is there anything that can be done to remedy this condition?

Click for Answer...

Q

I’m selling my co-op tomorrow and my bank attorney has not yet received the stock certificate and proprietary lease from my bank. Will the closing have to be adjourned?

Click for Answer...

Q

The seller has indicated that there was a leak in the bathroom from the apartment above that has been repaired in all respects? Can I rely on seller’s representation to that effect in the contact?

Click for Answer...

Q

Can I insist on closing on the date stated in the contract?

Click for Answer...

Q

The commitment letter included a condition that my loan was subject to a “second review” by the investor to whom the loan will be sold. Has my commitment letter been issued?

Click for Answer...

Q

Can I purchase my co-op in the name of a trust?

Click for Answer...

Q

Can I allow the seller to remain in possession after closing?

Click for Answer...

Q

There’s a repair needed in the apartment that the Seller promises to remedy after the closing. Is that a good idea?

Click for Answer...

Q

Do I care who the bank attorneys are?

Click for Answer...

Q

Do I have to go to the closing?

Click for Answer...

Q

One of the conditions in my loan commitment states that the monthly maintenance cannot increase by more than five percent? Is that a problem?

Click for Answer...

Q

Can I have a roommate after I purchase my co-op apartment?

Click for Answer...

Q

Can I undertake renovations before the Closing?

Click for Answer...

Q

Do I need a home owner’s insurance policy for my apartment at the time of my closing?

Click for Answer...

Q

Should I let the broker do the walk through?

Click for Answer...

Q

Once I get a loan commitment, is my loan approved?

Click for Answer...

Q

When it comes to purchasing an apartment, what exactly is due diligence?

Click for Answer...

Q

Do I have to let the maintenance people in to fix a building system?

Click for Answer...

Q

Does my dog have to be interviewed by the Board?

Click for Answer...

Q

Is buying an apartment in a small building a good idea or a bad idea?

Click for Answer...

Q

Can I fudge on my numbers in my financial package to the Board?

Click for Answer...

Q

Should I use a mortgage broker or should I go direct to a bank?

Click for Answer...

Q

Should I have the apartment inspected before I sign the contract?

Click for Answer...

Q

Do I Really Have to Give the Board My Tax Returns?

Click for Answer...

Q

I am purchasing an apartment with extensive landscaping on the terrace. Can the co-op or condo make me remove landscaping that was existing at the time of my purchase?

Click for Answer...

Q

I have an opportunity to buy a garage space, but the sponsor is calling the arrangement a “license” rather than a “purchase”. Does that matter?

Click for Answer...

Q

We are considering an apartment that will require us to move the bathroom to another location in the apartment. Is such a move possible?

Click for Answer...

Q

The seller’s bank can’t locate the stock and lease for the co-op closing. Can we still close?

Click for Answer...

Q

The broker told me that I can adjourn the closing for 30 days? Is that correct?

Click for Answer...

Q

The Offering Plan for my condo indicates that the apartment has a “lot line” window. Is that a problem?

Click for Answer...

Q

My dog bit someone in the lobby and I have been notified that if it happens again, my dog will have to go. Does the Board have the power to restrict me from having a pet?

Click for Answer...

Q

There is an unobstructed view from the apartment I am considering, but there is a vacant lot directly in front of that side of the building. Is that reason for concern?

Click for Answer...

Q

The Managing Agent called and it looks like my finances will not be sufficient to get Board approval. Is there anything I can do?

Click for Answer...

Q

The managing agent has had our application to purchase a cooperative apartment for three weeks and nothing has happened. Is there anything we can do to move things forward?

Click for Answer...

Q

We are considering an apartment in a co-op where the sponsor still owns units. Is that a problem?

Click for Answer...

Q

The seller’s apartment presently has a storage unit. Does the storage unit transfer with the apartment?

Click for Answer...

Q

We’re closing in three weeks, but our lease is up next week. Can we move in before the closing?

Click for Answer...

Q

I just did the walk through on the purchase of a sponsor unit and we have an extensive punch list. Will the punch list be completed by the time of closing?

Click for Answer...

Q

I’m buying an apartment from a sponsor and the Offering Plan requires me to pay the sponsor’s transfer taxes and attorneys fees. Do I have to?

Click for Answer...

Q

The purchase price of my apartment is over $1,000,000.00. Is the transaction subject to the “mansion tax"?

Click for Answer...

Q

I’m selling my apartment, but I’m not a resident of New York State. Are there any special closing costs?

Click for Answer...

Q

We did the walk through and the apartment was filthy. The contract required the apartment to be “broom clean”. Can we complain at the closing?

Click for Answer...

Q

I have to sell my apartment in order to afford the new one I’d like to buy. Can the contract be contingent on the sale of my existing apartment?

Click for Answer...

Q

I’m a famous person (no, I really am) and I really don’t want my financial information given to eight strangers on a co-op Board. Is there a way to avoid that?

Click for Answer...

Q

I’m the executor of the estate of a deceased shareholder. Do I have to go to the closing?

Click for Answer...

Q

I just graduated law school and have a job with a large law firm. I have a significant salary, but no liquidity or significant assets. Will I be able to buy a co-op?

Click for Answer...

Q

The listing indicates that the apartment has “roof rights”. How can I be sure?

Click for Answer...

Q

When buying a condo, is it worth the time and effort to get an assignment of the seller’s mortgage?

Click for Answer...

Q

The Seller removed an expensive chandelier right before Closing. Is that permitted?

Click for Answer...

Q

My husband and I found an apartment we love, but there’s a bidding war. Should we participate?

Click for Answer...

Q

We love the apartment, but the building has bad financials. Should we go ahead?

Click for Answer...

Q

My closing is in December, but the lease for my apartment does not expire until the following March. What do I do with my lease?

Click for Answer...

Q

We are buying a condo, but we have a delayed closing as the seller has a tenant in place for the next six months. We will be able to retain our loan commitment for an extended period of time?

Click for Answer...

Q

Should my husband and I take title as tenants by the entirety, tenants in common or as joint tenants?

Click for Answer...

Q

When a gay couple buys the shares of a cooperative or buys a condominium apartment, what is the best way to hold title?

Click for Answer...

Q

I have not been able to make my co-op mortgage payment for the past three months. If the bank declares my loan in default, how long will it take before the bank forecloses on my apartment?

Click for Answer...

Q

A co-op owner asks: I have found that maintenance is usually higher in coops than in condos because of the contribution by the shareholders to the building's underlying mortgage payments. In condos, the unit owners only pay for real estate taxes and common charges for common areas. Will the monthly maintenance be reduced after the underlying mortgage has been fully amortized?

Click for Answer...

Q

Can a corporation or other business entity own the shares of a cooperative apartment?

Click for Answer...

Q

I’m buying an apartment in a building designated as a “landmark.” Should I be concerned?

Click for Answer...

Q

I am buying a co-op that needs major renovations. The super has offered to do the work at a significant discount. Is that a good idea?

Click for Answer...

Q

We just submitted the Board package and we realize that we neglected to disclose a lawsuit against my husband’s company, in which my husband is named as a defendant? The lawsuit is covered by insurance and my husband is indemnified from liability by his employer. Should we notify the managing agent and amend the purchase application?

Click for Answer...

Q

We are negotiating the contract and we just found out that there is a substantial assessment that will go into effect the month that we close on the purchase. Should the assessment be deducted from the purchase price at closing?

Click for Answer...

Q

The bank attorney was two hours late to the closing. Was that my attorney’s fault?

Click for Answer...

Q

I’m buying a cooperative apartment in Manhattan, but I move out to the Hamptons from June to the end of September each year. Will I be able to sublet the apartment each year when I’m away?

Click for Answer...

Q

I just got the purchase application package and it's twenty pages long. Should my broker be helping me with organizing the required documents?

Click for Answer...

Q

It’s the day before the closing and I just found out that the maintenance for the apartment is higher than the maintenance stated in the contract. Is that grounds to terminate the contract?

Click for Answer...

Q

The financials for the condo are more than a year out of date and there is a delay issuing the new financials. Should I be concerned?

Click for Answer...

Q

The contract requires “official bank funds” in the form of certified or official bank checks. Can I bring “official" checks from my brokerage account?

Click for Answer...

Q

My parents want to buy me an apartment while I’m in graduate school in Manhattan. Will a co-op allow me to purchase the apartment, if my parents are co-owners?

Click for Answer...

Q

I obtained sole ownership of my condo in my divorce, but the deed for the apartment is still in both of our names. Will my ex-spouse’s cooperation be required when I’m ready to sell the apartment?

Click for Answer...

Q

I just found out I have to pay a fee to have my mortgage recorded. Is that right?

Click for Answer...

Q

I am buying an apartment in a small building and I just found out that the elevator is being renovated and will be out of service for three months. Do I have to close if the elevators will not be operational on the closing date?

Click for Answer...

Q

My husband and I own a co-op and we would like to transfer the shares to an irrevocable trust that we recently created for estate planning purposes. Will our cooperative allow us to make that transfer?

Click for Answer...

Q

The seller is a foreign citizen and does not have a social security number. Does that prevent the seller from selling the apartment?

Click for Answer...

Q

An “assessment” was imposed by the co-op Board after the contract was signed. Is payment of the assessment the seller’s responsibility?

Click for Answer...

Q

There is a leak in my apartment and the Resident Manager is not being responsive. Should I call the Board president?

Click for Answer...

Q

I just bought an apartment and I am only refinishing the floors and repainting. Do I need the consent of the Board before I get started?

Click for Answer...

Q

The co-op I’m interested in is pet friendly and I have a dog. Is there any chance the Board could approve my application without approving my pet?

Click for Answer...

Q

We purchased our apartment in January, but our first mortgage payment is not due until March 1st. Why isn't the first payment due February 1st?

Click for Answer...

Q

I’m buying an apartment from a sponsor and the contract does not provide for a “mortgage contingency”. Is that a provision that I can negotiate into the contract?

Click for Answer...

Q

I am buying an apartment from a sponsor and the contract provides for the buyer to pay the sponsor’s transfer taxes and legal fees? Is that normal?

Click for Answer...

Q

I'm buying a condo and my attorney just ordered the "title report". What's a title report?

Click for Answer...

Q

There is a leak in my apartment and the Resident Manager is not being responsive. Should I call the Board president?

Click for Answer...

Q

My boyfriend and I are interested in buying our first apartment in a new construction condominium. Our mortgage broker tells us we should qualify for a 90% loan, but it will be a close call for the bank. The sponsor wants us to sign a “no contingency” contract. Is that a good idea?

Click for Answer...

Q

We are considering a condo purchase in a new development that is only 25 percent sold. There is a bank that has approved the project and will make the loan, but should we be concerned about the number of units that the sponsor still has to sell?

Click for Answer...

Q

We are buying an apartment that has been extensively renovated. Among other things, the size of the master bath was significantly increased. Can we rely on a representation in the contract that all required approvals were obtained from both the Cooperative Corporation and from the New York City Department of Buildings?

Click for Answer...

Q

We received a draft of the contract of sale for the cooperative apartment we are buying and our social security numbers are on the front page! Our attorney told us that we will have to provide our identification numbers to the managing agent for a credit check as a part of the Board package, so it’s not a big deal. Do we have to list our socials on the contract?

Click for Answer...

Q

The listing stated that the apartment was 1,100 square feet, but the appraisal measured the apartment at 900 square feet. Can we cancel the contract and get our money back?

Click for Answer...

Q

I'm about to pay off my co-op loan. What evidence will I have from the bank that the loan has actually been paid off?

Click for Answer...

Q

I am considering an apartment in a new construction condominium. There is park under development by New York City that will greatly enhance the value of the condominium when it’s completed. Although the sponsor’s salesperson indicated that the first phase of the park will be completed in the next year or so, the Offering Plan contains a “Special Risk” that states that the sponsor gives no assurance as to when, if ever, the park will be completed. Who and what should I believe?

Click for Answer...

Q

We are in negotiations to purchase a co-op apartment on the Upper East Side. Our lawyer reviewed the minutes and discovered that the building has a bedbug infestation. Should we go forward with our purchase?

Click for Answer...

Q

My purchase application was approved by the co-op Board, but it is conditioned upon my providing a maintenance deposit and guaranty by my parents. Do I have to comply with the conditions?

Click for Answer...

Q

At my closing, I had to reimburse the Seller for his New York State “STAR” rebate that appeared on the maintenance statement for the month following the Closing. What exactly is the STAR rebate and will I be able to obtain the rebate as well?

Click for Answer...

Q

I'm selling my co-op next month and my attorney aked me to "freeze" the line of credit I have with my bank. What exactly do I have to do?

Click for Answer...

Q

I just found out that the seller will be unable to close for an additional two weeks. As a result, I will have to extend my rate lock, at a cost of $1,200.00. Is the seller obligated to reimburse this cost?

Click for Answer...

Q

I am buying a new construction condo and the Offering Plan is over 400 pages. Do I need to read the entire Offering Plan?

Click for Answer...

Q

We ran across a co-op that has a few “sponsor owned” apartments for sale. Is there any advantage in buying one of the remaining sponsor apartments?

Click for Answer...

Q

I am about to make an offer on an apartment, but I have not been provided with the current financial statements for the co-op. Am I entitled to review the financials before I make my offer?

Click for Answer...

Q

We are selling our apartment to our neighbor, but our neighbor can’t afford to purchase our apartment unless she sells her apartment. Her lawyer wants the contract to provide that the purchase of our apartment is contingent upon the sale of her apartment. Our lawyer is advising us against including a provision that makes the transaction contingent on the sale of the buyer’s apartment. Should we go along with the contingency?

Click for Answer...

Q

We are selling our co-op and the buyer is not obtaining a mortgage in connection with the purchase. The contract required the Board package to be submitted within 10 business days after the fully-executed contract was returned to the buyer. The buyer is two weeks late in submitting the package. Is the buyer in default?

Click for Answer...

Q

I’m selling my condo and I have not been able to pay my common charges for the past six months (I lost my job). I have a buyer for the apartment, but the Board of Managers will not release the Waiver of the Right of First Refusal, unless I pay the outstanding balance of the common charges. I’m between a rock and a hard place, as I don’t have the money. What should I do?

Click for Answer...

Q

I am combining two adjacent apartments that I own and I want the co-op to issue one stock certificate for both apartments. There is an outstanding UCC lien against one of the apartments. The other apartment is owned free of any liens. Can the co-op object to the combination?

Click for Answer...

Q

My attorney asked me to contact the managing agent to verify the maintenance and assessment information that's disclosed in the contract for the apartment I intend to purchase. Isn't that my attorney's job?

Click for Answer...

Q

Our application to purchase a co-op was turned down by the Board without an interview. Although our attorney asked the managing agent to disclose the reasons for the Board’s decision, none were given. Can the Board just turn our application down without any explanation?

Click for Answer...

Q

My bank issued a loan commitment, but then withdrew its underwriting because private mortgage insurance was not available. Will I have a problem canceling the contract and getting my deposit back?

Click for Answer...

Q

The seller has a storage bin, but the contract indicates that the apartment does not come with a storage bin. If I buy the apartment, can I be sure that a storage bin be avaialable?

Click for Answer...

Q

I’ve been asked to serve on the Board of my co-op. Could I be held liable if the co-op is a party to a law suit?

Click for Answer...

Q

I am buying a co-op in Manhattan. The managing agent is located in Brooklyn and refuses to send a closing representative to the attorney’s office for the buyer or seller located in Manhattan. Will everyone have to go to Brooklyn for the closing?

Click for Answer...

Q

We are purchasing a condo that was occupied by a tenant at the time the contract was executed. We just did the walk through and there is damage to a portion of the floor that was hidden by the tenant’s furniture. Are we entitled to a repair credit at Closing?

Click for Answer...

Q

A loan commitment was issued, but the bank requested an explanation for a $14.00 missed credit card payment that occurred nine years ago. Could the bank withdraw its commitment as a result of this missed payment?

Click for Answer...

Q

I'm selling my co-op, which I own with my mother and father. Is it okay to have the closing checks made out to the three of us?

Click for Answer...

Q

A leaking pipe inside the wall of my co-op was recently replaced. The following month, my maintenance account was charged $1,000.00 on the theory that the pipe only serviced my apartment. Am I responsible for this repair?

Click for Answer...

Q

A condo buyer has a mortgage contingency, but the closing will not take place for six months as the seller has a tenant in the apartment. When should the purchaser apply for financing?

Click for Answer...

Q

We submitted our Board package a month ago, but the Board has not scheduled an interview or asked for any additional information. To make matters worse, the managing agent won’t give us any indication as to what’s going on. Is there anything we can do?

Click for Answer...

Q

My co-op contract included the seller’s flat screen, but the bank underwriter required that it be removed from the contract as it was “impacting” loan to value. Can the bank do that?

Click for Answer...

Q

I am buying an apartment in a small co-op that is self managed. How does the bank obtain the required “co-op questionnaire” in order to complete its underwriting?

Click for Answer...

Q

I'm selling my apartment. When can I cancel my insurance coverage?

Click for Answer...

Q

My condo has requested access to my apartment in order to make repairs to the plumbing lines located in the ceiling. Am I obligated to give the super access to make the repairs?

Click for Answer...