The Absurdity of the Co-Op Closing in New York City

Hows your life going?  Pretty well?  Not a lot of stress at work or home?  Want some.  BUY A CO-OP!  Seriously, buy one.  It’ll “keep things interesting” in your life.  Keep you on your toes.

Let me just say that many times co-op boards are wonderful and have great people on them who are more than willing to take a fair look at your application and give you a quick decision and turnaround time to close.  Im not referring to these people.  All 3 of them in New York.  Rather, I’m referring to my last few closings where we have represented an eager purchaser who wanted to purchase a co-op in New York City.

Ill give you some context first, in terms of what happens when you purchase a co-op.  The abridged version:  Sellers send Contract to Purchasers.  Purchasers review, make changes, send back to Sellers.  Sellers shrug and agree to changes and sign (or don’t and then the attorneys go “cmon” for a while until everyone agrees).  We’re in Contract.  Mazel Tov.  Next up is ordering the Lien Search for the Purchasers attorney.  I can explain that to you, but you’d likely pass out on your keyboard and your boss would find you asleep.  And then you would hate me.  Heres the really important part though.  A purchaser applies for a mortgage gets something called a mortgage commitment.  That in essence means that unless you lose your job, or go to Vegas and gamble your savings away, chances are your bank is going to give you a mortgage in the amount you applied for.

Now that you have your mortgage commitment, you put together (and sometimes this happens prior) a Board Application package for the Co-Op Board.  This package can contain references, employment history, bank statements, credit reports.  Basically anything and everything as each co-op requires something different.

Now heres the kicker.  Here’s why I’m not a huge fan of many Co-Ops.  YOU WAIT.  You have to wait until the Board decides to meet to interview you.  How long does that take?  Dont know.  Literally.  No idea.  Could be 2 weeks, could be 2 months, could be 3.  Seller wants to move out?  Makes no difference.  Your bank is calling you to let you know the interest rate you locked in when you applied for your mortgage is about to expire?  Makes no difference.  The date listed in the Contract to close is coming up?  Who carrresssss.  There is literally almost nothing you can do push the Board to meet.  Why?  Because the Co-Op is a corporation.  Which means, in legal terms, that judges will almost never interfere in their decisions (its called the Business Judgment Rule).  And that means that the attorneys hands are, for all intents and purposes, tied.  As marvelous as some people think their attorneys are, there is really very little we can do.  Because if we push the Board too hard, there is always a chance they may simply deny the application.  It’s like a big Tree House club.  Literally.  Don’t mess with the Tree House rules or else you wont get into the Tree House.  Yes, I just said that.

In any case, the whole point is that your fate is decided by people who will meet whenever they see fit, behind closed doors, and will let you know their decision whenever they see fit.  I get the fact that co-ops cost less than condos or homes, for the most part, but the process is still entirely too difficult.  It is VITAL that your Real Estate broker keeps in constant and cordial contact with the management company for the co-op board.  It’s also vital that the Purchasers attorney speaks with your bank regularly to let them know if there are any updates.  You should be doing this also.  It’s a headache, but it can proactively deal with many things that can go wrong in a closing.

My general advice is that you expect to wait when you buy a co-op.  In other words, it doesn’t matter if that Contract you signed says you’ll close  by May 25th.  If the Board hasnt met yet, you’re not closing.  End of story.  And again, this isnt to say that all co-ops are bad.  Some are great and have some great people that love their building and they are super quick to decide if you’re going to be a new member of the Tree House.  But then there are the others….

So my GENERAL advice to you is to make sure you find out all the available information on a co-op before you decide to purchase there.  How?  Sites like www.streeteasy.com, www.trulia.com, or www.brownstoner.com may have some insights for you.  In addition, make sure you plan ahead, based on your date of closing. Work with your bank so they know that you may need extensions on rate locks, etc.   In other words…be ready to wait.

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