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You’re selling your co-op. You’ve listed it on all the best real estate sites, and held open houses and private viewings. You’ve managed to get multiple acceptable offers. Only one thing left: Choose the right buyer who is most likely to pass the board interview.
As any co-op dweller knows, this can be like throwing darts while blindfolded, hoping just one gets close enough to the bull's-eye. Depending on how difficult the board is, this can sometimes be the most challenging part of the co-op selling experience—because if your board decides to nix your buyer of choice, you have to start the process all over again.
There are any number of reasons why the board interview might tank your sale. Maybe upon closer inspection, the buyer’s financials weren’t as sound as they should be. Maybe during the interview they mentioned that they would like to get a dog someday and your building is not pet friendly. They might not have dressed appropriately—which could be anything from too casual on the Upper East Side to too dressy for certain Brooklyn neighborhoods. Maybe the board president was in a bad mood that day.
“The most frustrating thing about co-op board turndowns is that they can reject a buyer for ‘any reason or no reason,'” says Dolly Hertz, an associate broker with Engel & Völkers.
Fair Housing regulations are supposed to be strictly observed, and as problematic as it sounds, a board that's wary of discriminating against a protected class will "be careful to keep their true reason [for denying them] under wraps,” Hertz says. Plus, boards are not required to divulge what their reasons are for turning down a buyer.
So what are the steps to make sure you make a good choice to begin with?
Talk to the board president
Before even finding a broker and putting your place up for sale, talk to the co-op board president, let them know you are considering selling, and try to find out exactly what it is they are looking for, says JD Sharpe, a salesperson with Citi Habitats. Also, there could be upcoming assessments you’re not aware of, or a change in rules.
“Get the list of questions the board will ask, because more than likely there will be an interview process,” he says. Once a potential buyer has been found, it’s then important to have them be prepared to go over those questions, “like being prepared to go in front of a jury.”
An example of one question Sharpe has seen is, “How many promotions have you received over the last 10 years at your job?”
They’re trying to find out how good that person is at their job, and to gauge how much money they’ll make or could be making in the future, he explains.
Also, try to find out what has caused previous board turndowns in the building. Ask people you might know who have sold their apartments, or have your broker seek out other brokers who have done deals in your building. “This is very helpful in gauging whether your buyer has that certain something [the board] likes or doesn’t like,” Hertz says.
One thing multiple brokers mentioned was to review all buyers’ financials, and choose the one with the strongest qualifications.
The Siderow Organization requests a Real Estate Board of New York financial statement from buyers with offers. “[It] calculates the liquid versus non-liquid assets, the debt-to-income ratio, post-close liquidity, and months of carrying costs liquid post close,” says Joshua Arcus, president of Siderow.
A board’s typical desired debt-to-income ratio (your total annual debt divided by your total annual income) is below 28 percent, Hertz says, which is also what conventional financing limits are. But some boards have their own specific financial criteria.
Boards could also require a certain amount of liquid assets be available after the close. Arcus has seen post-close liquidity range from four years of monthly costs (mortgage plus maintenance) to up to two or three times the purchase price. “It all depends on how strict the building is,” he says.
Letters of recommendation
Recommendation letters carry a great deal of weight, say brokers. Generally, boards require five letters per applicant, so that can be 10 per couple. “It’s the job of the buyer’s broker to really mother hen these letters: Spelling, grammar, punctuation must be perfect,” Hertz says.
But it’s the seller’s broker who should be the guide here—“it is his or her job to present only candidates who meet all of the financial criteria and to assist the buyer’s agent in tailoring the board package and letters to what the board usually finds desirable.”
Letters should be friends or colleagues with a long-term relationship with the applicants. “The higher up and more prestigious titles you can get, the better. [Boards] are looking for names, titles, and credibility overall,” Sharpe says.
“That is not to say that a well-penned, heartfelt letter from an old college chum won’t be appreciated—it will be, if it rings true and goes into detail about the applicant’s virtues,” Hertz adds.
Vet the pet
A lot of buildings want pet interviews now, says Melissa Leifer, a salesperson with Keller Williams of Tribeca, so it’s important to know ahead of time whether potential buyers have pets and whether they would fit in well with the building. “They can be a very serious issue if the dog is aggressive,” she says. “In my building, we have a lot of little kids and no one wants an aggressive dog who can possibly bite somebody.”
With so many people working from home these days, what someone does and where they do it might be a red flag for some boards. Some occupations are prohibited from being conducted in a residential dwelling according to the city’s zoning codes, such as a barbershop or beauty salon, pharmacy, or real estate or insurance agency.
Others might be preferred. For example, “if you have a potential applicant who travels often, I’ve noticed at times that they’ll go higher up on the list when it comes to the selection, because there’s the idea that a professional not there as often is appealing. It means less traffic in the building, less noise,” Sharpe says.
Some boards do not want full-time students living in their co-ops, so it’s important to find out if a parent is buying an apartment for their child. “It’s really come up the last two to three years in the Village in doorman buildings. And it’s legal [to reject them] because they are not lawfully employed,” Leifer says.
Sellers will often have to go on the word of their brokers for this one, as often the seller doesn’t meet the potential buyer until the day of the close. But knowing how a buyer will present—whether it’s an attire issue or health one—can be helpful.
“I know somebody whose client has a sleep disorder. They look like they’re on drugs all the time, but they’re not. If that’s not presented to the board in the right way, it could be a red flag for a board member,” Leifer says.
Have your broker review board packages
It’s important for the seller’s broker to review an applicant’s package before it’s submitted to the board. “I look at all packages before they go out just in case the other broker missed something,” Leifer says.
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