You've finally found a co-op you want (enough with this competitive market!), negotiated the price successfully and signed a contract, and the near-mythical board interview is next. But in between is an all-important stop along the road to NYC apartment ownership that's just as crucial: preparing a no-fail co-op board package. While your broker does a chunk of the heavy lifting, your role is equally significant.
"The buyers have to get all the documentation together. The broker's job is to make it look pretty and clean it all up," says Ari Harkov, an agent with Halstead. Usually, there are one or two rounds of back-and-forths, but "you can cut down on time between offer and closing if you do it well," says Harkov. If you're paying cash, he suggests leaving 10 to 15 days to get the package together. If you're financing, you have at least 30 days to get the commitment letter (which you need to include in your board package), giving you a little more time.
Another way to think of the sometimes-laborious package-gathering process: It's a means to an all-important end. Handing it in is like subjecting yourself to a pre-interview that gives board members a first impression that could make or break your transaction. Here's how to ace it.
1. Follow directions
It seems easy: Usually, a management company or brokerage will send you a "how-to" explaining exactly what you need to include in your package, but not everyone follows it. "It seems obvious, but people don't always do it," says Caroline Surace of Halstead Management Company.
The bottom line: Include everything asked for and don't put in more than needs to be there. A big no-no: pictures. "We don't care about what your house in the Hamptons looks like and we don't really care what you look like," she says.
2. Start preparing early
"Just before you sign your contract, ask for a sample application with all of the documents you need for the board application," suggests Hakim Edwards of Halstead. "It gives you time to request statements by mail in case they are not available online." (You will be surprised how many retirement accounts and bank statements are not available online.)
3. Include all essential financial details
If you're financing, you'll absolutely need a commitment letter from the bank, says Harkov. And that takes 30 days to get. And, while co-op board requirements vary from building to building, there are some nuts-and-bolts requirements: financial statements that show assets and income, specifically tax returns and bank statements. "Those are the heart and soul of the package in broad strokes,"says Harkov.
Usually, the board will want two years of tax returns and your most recent bank statement. When it comes to stocks and retirement account reports, the most recent paperwork is usually fine, too.
4. Binders are your best friends
Almost everyone we spoke to said that web-based co-op board packages are the way of the (near) future; but for now, the vast majority of boards want everything on paper.
"Make sure you are organizing the board package exactly the way they ask for it and use as many dividers as you can—for example, for the financial section you should make dividers for each section (cash, investments, etc.) so that the board can easily slip back and forth to verify info," recommends Joshua Arcus, an agent with Siderow. And, he cautions against leaving anything blank: "Even if you don't have financing, still have a divider for that portion and then include a small letter saying that this section is blank because there is no financing."
"The best board packages are the ones that are the most organized," one Upper East Side co-op board treasurer told us. Co-op board members don't want to have to search through the binder for missing documents. "Make it as easy as possible for them," she says.
5. Include a cover letter and table of contents
Harkov says this lets board members easily find what they need. "We believe in two cover letters: one is the table of contents and one explains who you are, [where] you put your income, your assets (post-closing), and your debt-to-income ratio. So if board member doesn't want to read the whole package, they get everything they need from these two parts," he says.
6. Flattery will get you everywhere (only if you're sincere)
"Compliment the building (honestly) in the buyer's intro letter, because every member of the board chose to live in the building," says Betsy Hoffman of Brennan Realty Services. "By adding a few lines highlighting the pros, it's a great way to acknowledge the smart financial choice they once made.
7. Don't allow for unanswered questions
Co-op board members are volunteers (with jobs and families in many cases) and they don't want to spend a lot of time going back and forth with you asking for more from your package—plus the longer it takes for them to approve the package, the longer it'll take to close on your apartment—so make sure all claims you're making have back-ups. According to Surace, one of the most common, and biggest, screw-ups is paying cash and not showing that amount of cash on the financial statement. It makes the board wonder where on Earth you're getting the money.
"Sometimes people will say there will only be two occupants in the apartment, but their tax returns show they're liable for other people," says Surace. "You need to explain that."
Discrepancies need to be clarified. "Our building doesn't allow for new pets," says the UES co-op board treasurer, "but sometimes people say their pet is therapeutic. If that's true, we need documentation to back that up."
The idea is to preempt any questions. For example, if you're recently divorced be prepared to give detailed information about alimony payments, whether you give or receive.
8. Choose references wisely
"Pretty much every co-op will ask for some amount of reference letters," says Harkov. "They fall into several categories: An employee letter, which comes on company letter head and says you have the job you say you do, verifies your base salary, and references your bonus (though some companies don't like doing that); a business reference letter from a superior or colleague, which offers substantive feedback about you in a work environment, including details on how responsible you are; a personal reference letter, and a letter from your current management company confirming that you pay rent or monthlies on time."
Specificity is key when it comes to references, Harkov says. "You want your references to include details like, 'she helped me when my kids were sick,'" he said.
One Yorkville co-op board member put it this way: "What separates one applicant from the next is the personal aspect—specifically, the recommendation letters. Because when it comes down to it, once we are all in agreement that the applicants have the financial capacity to purchase, we really just want to see if they will make nice neighbors. Who are they asking to recommend them? Do they read like boilerplate or do they really tell me that these are good, nice people?"
So who should write your personal reference letter anyway? "The best person is a NYC co-op board member, the second best is a co-op owner and the the third best is any kind of apartment owner in New York City. The idea is to use someone who gets how important it is to have good neighbors and can vouch for that fact that you would make one," says Harkov. If you know someone who already lives in the building—even better.
But references "should be from the best people who can speak honestly about you," says Arcus. "In the case of a younger couple, possibly a parent's friend would be a better choice than a colleague. If the purchase is a large one or is in a distinct building then you need to pull out all the stops."
9. Make the package, and check it twice (or thrice, or more)
"Multiple qualified eyeballs are always a good thing," says Harkov. The buyer's broker prepares the package, but the seller's broker, the managing agent, and even the lawyer should review it. Check for typos and see if anything stands out (in a bad way) to anyone.
10. Don't expect condo board packages to be that much easier
You're not home free just because you're buying a condo, which also sometimes ask for board packages. These days, says Halstead's Surace, condos are more cautious than ever because of higher rates of foreclosures. "Condos are acting like co-ops now," she says. "They're starting to ask for money in escrow, guarantors. They're being more cautious because of the higher rates of foreclosures in condos," she says.