The first step to finding your dream co-op is becoming aware of the possible ways your application could be rejected. That incites will enable you to zero in on the right buildings as well as adjust your application to avoid rejection. It is also imperative that you hire a broker who knows the criteria and delicate nature of the co-op boards you want to apply to. And also has the ability to create a fail-safe board package that can be your golden ticket into the co-op of your dreams. To help you get into the co-op you desire listed below are the top dozen ways to avoid application rejection.
It is crucial that a prospective buyer has sufficient assets following a closing. A board is looking for:
- An adequate amount of liquid assets.
- Potentially two to four times the value of the purchased apartment after closing
- Two to three years of maintenance and mortgage payments in your bank account after all closing costs have been paid.
An experienced broker will be aware of each building’s requirements and also keep on top of those changing variables, as new boards are elected every year and the criteria for new buyers changes.
Tip: A standard rule is that co-op boards usually want a buyer to be able to allot 25 percent of their earnings to the payment of mortgage and maintenance.
- Job History
Most co-op boards will also request your job history along with your annual earnings. A board wants a buyer to demonstrate job stability, it isn’t uncommon for an application to be rejected because a prospective buyer changed jobs too frequently even though they had sufficient funds.
- Bad Credit
Even if you have a good income and plentiful assets your application could still be rejected if you have a poor credit score. This is especially true if you have a negative track record of paying your current maintenance fees or rent.
Tip: Another reason to hire a good broker is because they will review a client’s financial history to make sure there are no red flags that could warrant rejection by a board.
The acceptance of pied-a-terres depends on the board. Some boards are entirely receptive to pied-a-terres while others make decisions on a case-by-case basis and some don’t allow them at all. Make sure to discuss with your broker if you’re looking for a pied-a-terre so they can gain a clear understanding of the rules in the building of interest.
Keep in mind even if a building will consider the sale of an apartment as a pied-a-terre, the board can still reject part-time tenants who they feel will be spending too little time in the apartment.
If you require a guarantor make your broker aware. This will allow them to make sure that all prospective buildings are guarantor friendly. Most buildings change their rules and bylaws annually, so your broker must be up-to-date on those changes to prevent rejection.
Tip: Even if a building permits guarantors you should qualify your guarantor because boards will require a couple years of tax returns and a verification of income and assets.
The acceptance of shareholders with high public profiles varies from board to board. Some boards would rather not have any undue attention on their buildings. And of course, most buildings don’t want those who will upset the peace, quiet, and security of its shareholders.
- Home Work
As long as your occupation doesn’t involve a revolving door of clients in and out of the building most boards will be accepting of tenants working in their homes. For example, a writer and freelance editor is acceptable but a psychiatrist will most likely be rejected.
- Failure to Fulfill Additional Requirements
Once you have sent a comprehensive package to the board with all requested information they may still require additional documentation for clarification or a precondition escrow deposit before granting an interview. If you do not consent to the supplementary demands it is likely that the board will reject your application.
A common request is for one to three years of maintenance in escrow. If a board reviews your application and feels that you don’t have strong enough financials they may still approve the purchase if you agree to put maintenance into an escrow account. After you have a history of meeting financial responsibilities the escrow will be dissolved and the funds returned. If you do not agree to the maintenance escrow you will be rejected.
- Low Purchase Prices
If a shareholder is selling their co-op apartment at a below-market price in order to entice a rapidly executed deal, the board will reject the buyer. This is because these deals reduce the value of all the apartments in the building.
This also falls under the necessary due diligence of your broker. It is up to them to learn which buildings are pet-friendly. Even though some buildings allow dogs, it is still up to your broker to learn the potential limitations on the number or breed of dogs allowed.
Tip: Most boards only allow two dogs per apartment and won’t allow Pit Bulls, Mastiffs, or Rottweilers. Some won’t even permit dogs that weigh more than 50 pounds.
You can be rejected if your profession or hobby entails making noise that will disrupt the other shareholders. For example, a drummer or tap dancer may be rejected. Some boards may still approve your application on the contingent upon sound-proofing your apartment, prior to taking possession of the apartment.
- A Poor Interview
An astute broker will prepare you for the inevitable board interview. To avoid a poor interview you should:
- Be on time.
- Appropriately dressed.
- You shouldn’t ask questions that can trigger concerns or suspicions in even just one board member.
- You should answer all questions politely and as concisely as possible.
Once you have been accepted by the board, have closed on your apartment and moved in, you can make any suggestions and ask as many questions of the board as you wish.
If you keep in mind these 12 ways to avoid rejection by a co-op board and hire an experienced and detail orientated broker you should be closed and moved into the co-op you desire in no time.
All Area is New York City’s leading real estate management company specializing in full-service property management for cooperative and condominium boards in the Manhattan area.