Tuesday, August 28, 2007
How are disclosures different for co-ops and condos?
In Manhattan about 80% of the owned residential housing market is co-op. Condominiums are probably less than 20%, with townhomes as a small group of select, boutique properties. Purchasing any of them involves some sort of application process. It can be as simple as a request for information between principals in a townhouse transaction, to a full financial disclosure, co-op board package; with a rigorous process requiring an interview with a Board of Directors.
"I've noticed some condominiums now asking for more elaborate applications on resales"
It's a practical requirement for any serious offer on co-op apartment to have pretty complete financial disclosure upfront, before going to contract with a customary 10% deposit. Before the end of the board approval process you will have backed up your statement with documentation and letters of recomendation anyway, or risk a board turndown. The REBNY standard financial disclosure statement (pdf 188kb) will give you an outline of the kinds of information that sellers and co-op boards need to know. Sellers who already have been through the process will appreciate a professional level presentation for it.
Condominiums are more relaxed about financial profiles than co-ops. If you can get a loan you can usually buy the property. I encourage my buyers to be as forthcoming as they are comfortable with, in disclosing their financial position, when making an offer. At minimum I like customers to authorize me to share basics about employment and income with the listing broker. They will in turn, report that information to the seller. The fact that you were willing to disclose it builds trust, and hopefully paints a picture of why you are able to follow through. It may well be the factor which makes the person on the other side of the table, comfortable enough to do business.
In an effort to exert more manageral control over their properties, I've noticed some condominiums now asking for more elaborate applications on resales, including letters of reference, and levels of financial disclosure beyond a comitment letter from a lender. Just shy of a co-op application.
Owners should know that when subletting a condo or coop, the applicant may be subject to the same or more stringent standards in applying for a lease if it's even permitted. The owners may need to pay additional fees for the privledge. Co-ops have the power to turn down an applicant outright, while condos typicaly can excecise a first right of refusal. Meaning that they may intervine, and complete the transaction at the negotiated terms.