One reason that buyers searching for an apartment in New York prefer condos to co-ops is that condos cannot reject applications.
While most co-ops put prospective buyers through hell to merit approval as financially sound and otherwise desirable enough to become shareholders, condo boards just don’t have that option.
All that condo boards of managers can, and hardly ever, do is exercise the right of first refusal. They’d have to purchase the apartment themselves.
How then to explain the practice of requiring buyers to go through nearly the same exercise as co-op buyers must endure — virtually everything but the dreaded board interview?
If asked, condo boards say they want assurance that the applicant has sufficient financial resources to ensure timely payment of common charges.
For that, they need letters of reference and much of the other documentation that they demand?
Another explanation that I’ve heard is that condos became paranoid after 9/11, so asked for reams of information to ensure that no terrorist would live among them. Like no terrorist would be able to come up with forged documentation?
I got to thinking about this situation again after clients of mine had thrust upon them a 111-page board application package, of which many necessary pages involved house rules, other acknowledgements and permissions (e.g. a credit check).
What that condo’s board mandates is seven collated copies (plus original) of the completed application, which is about as comprehensive as any co-op board package. Its contents:
- Applicant Information for Purchase form;
- Certification and Acknowledgement of Fees Form;
- Financial Information Form;
- Credit report authorization;
- Window Guard Rider;
- Notice of Intent to Sell or Lease a Condominium Unit (from the seller);
- House Rules and Regulations Acknowledgement;
- Home Occupation Rider;
- Insurance/Keys Rider;
- Pet Rider;
- Notification of Legal Mailing Address;
- Emergency Contact form;
- Fire Safety Acknowledgement form;
- W8 or W9;
- Verification of Assets with either bank reference letters (stating type of accounts, deposits and account number) or first two pages of each account listed on the Financial Information Form;
- Contract of Sale;
- Loan commitment letter plus Good Faith Estimate if the rate has not been locked in;
- Most recent federal tax returns;
- W-2 forms;
- Employment/income verification, i.e. pay stubs, W-2 form, CPA letter, or Financial Statement for Business prepared by CPA;
- Two personal reference letters (must be typed)
- Landlord reference letter;
- Photo identification such as driver’s license, valid U.S. passport, alien registration card or foreign passport with valid visa;
- One personally typed profile letter or letter of introduction from each occupant.
The typed financial statement alone is a Sisyphean burden, requiring the buyer to give a detailed accounting of everything from the value of investment property to the cash value of life insurance and the number of shares of individual stocks, bonds and mutual funds. Dividend income for two years must be recorded, alimony disclosed and participation in a lawsuit revealed.
Liabilities covered by the form include notes payable, taxes owed and credit card debt.
The process is like lighting a candle with a blowtorch.
Wouldn’t a credit check and last year’s tax return provide all the insight any condo needs? For that matter, wouldn’t they be enough for a co-op in a building with pretensions?
Foreclosures are costly and time-consuming to be sure, but boards always have them as an option. It is an option from which they almost invariably will come out ahead anyway, and it is lawyers, not board members, who do the heavy lifting.
Besides, it’s hard to see how all the scrutiny has provided much of a guarantee to date against an apartment owner’s losing a job, suffering a devastatingly expensive illness, becoming a gambling addict.
Especially in these times, we all know that past is no precedent when it comes to homeowners’ ability to pay their bills.
Boards have a fiduciary duty to act responsibly. Do they not also have a responsibility to act respectfully?
Tomorrow: Weekly Roundup
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Licensed Associate Real Estate Broker
Senior Vice President
Charles Rutenberg Realty
127 E. 56th Street
New York, NY 10022