Friday, February 21, 2014

The co-op board interview: Think of it as a small social gathering at, say, Buckingham Palace.

Part 7 of a series

Remember, if only for those 45 minutes to an hour, the board members have a great deal of power over your future.   

They can reject you for any legal* reason they want, and they don't have to tell you what that reason is.  So be very, very respectful.

Keep in mind that the vast majority of co-op board members are decent, sane, reasonable people whose primary motive in their capacity as board members is to preserve their investments and to live in their homes in peace and quiet.  

So the best course is to smile and be pleasant, but leave your sparkling, witty side at home.  Being the life of the party may not endear you to the board members.  They are considering you as a potential co-resident of the building, not as a friend or party guest. 

And nobody has ever been rejected for being boring.

Do not bring along anyone who is not invited—definitely not your broker or attorney.  If they have asked for your children or your dog or anyone else who will live in the apartment to attend, bring them, but ONLY if they’ve been asked.

Dress in business clothes; for men, a jacket and tie, if not a suit, are a good idea.  If it’s on the weekend, wear what you would wear for casual Friday in the office.

When you walk in, wait to be invited to sit down.  If nobody remembers to invite you, pick out a spot and say, “May I sit here?”

If offered coffee or tea, accept only if others are having some.  If offered a glass of wine, smile and decline, unless everyone else in the room is drinking.  Then have one glass.  Sip it slowly.

While for some co-ops, the board interview is simply a chance to welcome the new resident to the building, tell him what days the trash is picked up, etc., for others it’s a chance to ask a lot of questions**.  

Answer them honestly, but don’t say more than you have to, and don’t answer any questions you haven’t been asked. 

In the unlikely event that a board member asks an offensive question, answer calmly, as best you can.  

If you’re asked a question you're willing to risk losing the apartment over in order not to answer, just say politely, “I’m sorry, that’s something I’d rather not discuss.”  It’s entirely possible that at least some of the other board members will also consider the question inappropriate

Under no circumstances should you take anything personally, or get defensive.  Just stay serene and pleasant, no matter what.

If you’re asked about renovations, it’s best to say you want to live in the apartment for a while before making any changes other than redoing the floors and painting, assuming this is true. (It’s an excellent idea, in any case, and I recommend it strongly.) 

On the other hand, if the apartment is currently uninhabitable, of course your architect is, or will be, working on plans which you will be submitting to the board as soon as they’re ready.  

If you ever plan to sublet your apartment, this is NOT the time to mention it.  If asked, you have no plans to do so (which should be the truth anyway, at this point, or you wouldn't be buying a co-op).

Avoid asking questions yourself. “When are you going to redo the lobby?” carries the implication that you don’t like the lobby.  If asked, the safest response is to say you don't have any questions.  

If  given the opportunity, talk about how much you love the apartment and how you have always wanted to live in the building, but do not assume you will be living there. 

At the end of the interview, you can say something like, “It’s been a real pleasure meeting you.  I hope we’ll be neighbors.”  Do not ask how soon you can move in.

What happens now?

As soon as your broker hears from the managing agent that you are approved (usually within the next day or so), your attorney and the seller’s attorney will set up a closing time, date and place with the managing agent. 

24 hours or fewer before the closing, you will walk through the apartment with your broker and the seller’s broker and make sure everything is as it’s supposed to be.  

You’ll turn on all the appliances and make sure they work, check all the closets and the refrigerator, and make sure they’re all empty.  

If anything is amiss, the seller and/or the seller’s broker must take care of it before the closing (you’d be surprised how many refrigerators I’ve had to empty out!) 

Your attorney will explain to you exactly what happens at the closing, but briefly, a lot of checks will cross the table, documents will be signed, and at the end you will be given the keys to your new home.  

Take your keys and your partner, pick up a bottle of Champagne and a couple of glasses, and go sit on the floor and celebrate.

And if I’m your broker, we will pick a date for me to take you out for a lovely celebratory dinner.

On the other hand, if somehow you have been rejected, it’s okay for the brokers to ask the managing agent if there’s any more information you could provide that might help.  It’s also okay for the seller to talk to somebody on the board and try to get a fix on the problem.  These tactics may or may not work.

If they don’t, you get your 10% of the purchase price back.  

And look at it this way: you didn’t want to live with those nasty people anyway.  You and your broker will now proceed to find something just as good, maybe better.  

And you will.  You have my word. 

Any questions?  E-mail me at or call 917-991-9549 for answers or just to talk real estate.

*The law prohibits discrimination on the basis of gender, race, religion, sexual orientation, family/marital status and occupation, among other things.  Find a complete list here: New York State Division of Human Rights Fair Housing Guide or ask your attorney. 

** An article in Brick Underground gives you an idea of the possibilities:  9 curveball co-op board interview questions and how to answer them.

Thursday, February 13, 2014

Board application packages: More fun than a root canal, but not much.

Part 6 of a series

I will not lie to you.  The application process for a co-op is painfully invasive.  And lately, the same goes for condos.

Think of your broker as a local anesthetic*.  He will make the pain go away, or at least most of it, but you will still be involved, and you will know what’s going on.

Don’t forget, everyone who lives in a co-op or condo has gone through this process.  

And because your neighbors have met the financial requirements of your co-op, they are not likely to default on their maintenance charges, leaving you and your more solvent neighbors to pick up the slack. 

It's the predominance of co-ops, with their stringent financial requirements, that has kept New York from having the huge number of foreclosures that other parts of the country have seen.  

So this whole Byzantine, complex, invasive process is definitely in your best interests as an owner.

Today, board application packages for condos are almost--often exactly--the same as those for co-ops**.  If the condo board doesn’t like your board package (condo boards don't normally interview applicants), their only recourse is to buy the condo themselves at the contract price.  They can't turn you down, but they still want the information.

The only way out is to buy in a new building (developers don't care; they just want your money) or to buy a house.  All cash.  If you want to finance, you will find that the banks are also nosy.  So are rental landlords.

Here’s what happens:

Once your offer has been accepted and a contract has been sent to your attorney, your attorney will do his due diligence on the property.  

In all likelihood the seller's broker will continue to show the property until the contract is signed, and by law, any and all offers must be presented to the seller. So move through this part of the process with all deliberate speed.

Your attorney will read the two most recent years' financial statements and the offering plan and all its amendments, which either the seller’s broker or the seller’s attorney will have sent him. 

He will also go to the office of the managing agent for the co-op and read the minutes of the meetings of the co-op board (you can go along if you want; these are almost never sent out).  

By the time he's through, he should know everything there is to know about the co-op.

At the same time, he and the seller’s attorney will be negotiating the contract—the closing date and various other provisions which he will discuss with you.

While he’s doing this, you will be having any inspections done (definitely if you’re buying a house, and a good idea if you’re buying in a small loft building or an apartment in a townhouse) and bringing your architect in if you’re planning to do work.  

Your broker will set up appointments, be present, and generally hold your hand through all of this.

When the contract is ready, you will go over it with your attorney, sign it and give your attorney a check for 10 per cent of the purchase price to be held in escrow until the closing, when it becomes part of the purchase price.

Now you’re committed, and as soon as the seller countersigns, he is also committed. The property will no longer be shown, and offers will not be considered.

Your 10% deposit will be returned to you if your contract is contingent on financing and you can’t get financing (your attorney will explain the ins and outs of this—it’s complicated) or if you’re buying a co-op and your application is rejected by the board.

Which brings us to the board application.

First, you and your broker put together the board package.

This is where you will be VERY GLAD you have a broker.  All you have to do is give him the information.  He will collect the materials from you, get them typed if necessary, assemble them in the correct order, check all the numbers and the arithmentic to make sure they’re accurate, make sure the reference letters are appropriate and will serve their purpose, make sure the package is complete, put the whole thing together with dividers labeling each section, write a cover letter and make the necessary number of copies. 

It will look beautiful, and as impressive as we can make it while staying within the boundaries of truth.  We pride ourselves on our board packages.

A typical package includes an application form to be filled out with personal information—your name and address, your attorney’s name and contact information, plus information about your employment, your supervisor’s contact information, your employment history, where you were educated, names of personal references, names of business references, bank and credit references, etc. 

Then there’s a financial statement that includes all sources of income, all projected costs, all assets and liabilities. You’ll be asked for two years’ income tax returns, personal reference letters, business reference letters, an employer reference letter and a bank reference letter, bank statements and other statements to support the financial statement, and various other items depending on the co-op.

All of this has to be done within ten days of the contract signing, or within a given time period after a co-op loan commitment letter has been issued by your lender.  (This is specified in the contract.)

When the board package is ready and the seller's broker has seen it and is happy with it, your broker will send it to the managing agent. 

Now you and your broker wait for a while.  If you're buying a condo, the next step is for the managing agent to obtain the signatures of the condo's board of managers on a waiver of the right of first refusal, after which a closing can be scheduled.

If it's a co-op....   

NEXT:  The board interview.  

Any questions?  e-mail me at or call 917-991-9549.  I'll be happy to answer them.

*I was about to say novocaine, but it turns out dentists haven't actually used novocaine in more than thirty years, as per "Directions in Dentistry," a blog by Dennis Calcaterra, DDS, of Orange, CT.

** See "Condos Steal a Page (or 20) From Co-ops"

Thursday, February 6, 2014

Bidding wars: The only good news is that nobody actually gets killed.

(Part 5 of a series)

Here's what's wrong with bidding wars:  

They can involve dozens of people, but only two parties win--the seller and the buyer whose bid is accepted.  

Everybody else goes away mad, buyers and brokers alike.  

The worst outcome is that, after everybody else has gone away, the buyer with the accepted offer suddenly realizes he's bid over his head and goes away too, and by that time the other buyers have either found other properties or are still so upset they no longer want this one.  

But when inventory is as limited as it is now, bidding wars are a fact of life. There are currently far more buyers than available properties, and that means heavy competition.

In a recent survey I made of co-op and co-op sales downtown over the last few months, more than half had sold at or above the last asking price.  

That means there were an awful lot of bidding wars.

Most brokers working with buyers (including me) have strategies for winning bidding wars.  Sometimes these work; sometimes they don't. 

The way a bidding war usually happens is this:  When more than one, or perhaps several, offers are made on the same property and none of them is distinctly better than the others (not just higher, but also from a buyer with better qualifications who offers better terms), the seller's broker will ask all the buyers' brokers for their buyers' best and highest offers in writing by a given time on a given day.  

Sometimes the term "best and final" is used, but as bidding wars can devolve into free-for-alls, the word "final" as applied to an offer can be meaningless.

After the deadline, the seller will review all offers and choose which to accept.  Then  a contract will be sent to the winning buyer's attorney.

You might think this is an orderly, logical and reasonable process.  Well, it should be.  Maybe sometimes it is.  But often it isn't.

During the time before the deadline, there is a lot of backing and forthing between the seller's broker and the buyers' brokers, who are trying to gain some insight as to how far their buyers have to come up in order to win while also trying to make sure the seller's broker understands how fantastically well-qualified their buyers are and how much they truly love the property.

Buyers' brokers are frantically trying to reach their clients.  Clients are trying to reach their accountants.

The seller's broker is fielding phone calls constantly, trying both not to give away information that might hurt the seller in any way, and to get the highest offer possible.

When all the offers are in, and one is accepted, you'd think we could all breathe a sigh of relief and move on to getting a contract signed. 

But no.  Not always.

One of the losers may decide he doesn't want to be a loser and open everything up again by raising his offer substantially.

When this happens, if I'm the seller's broker, I want to go home and crawl under the bed.  But I don't.  It's my job, and most of the time I love it.

The new offer may be so high as to be irresistible to the seller.  So the seller will accept it and tell his lawyer to send out another contract in addition to the one he's already sent.  

It then becomes my job to tell the broker for the first buyer that his accepted offer has been un-accepted, and ask if he wants to raise it, as a higher offer has come in.  

Harsh words are usually the result, and I am on the receiving end.

If a contract is signed at a higher price of course I am very pleased.  This, after all, is the point.

But too often this higher buyer (fun to say that, not always fun to deal with it) ultimately decides he has bid over his head and walks away without signing a contract. 

I am then the one who goes back to the broker for the buyer who won the original bidding war and says hey, just kidding, your buyer's offer is accepted after all.

Only by this time, that buyer may be so angry that he is either no longer interested or actually wants to lower his offer.

The can is open, and the worms are wriggling all over the place.

Even more complicated and unpleasant negotiations may ensue, but now I'm getting a headache, so I will leave the possibilities to your imagination.

A broker needs a great deal of tact, patience, resilience and empathy to deal with this kind of thing. Fortunately or unfortunately, over the years I've been on both sides of many bidding wars and have grown a lot of calluses.  

There are three  very important things to remember if you, as a buyer, get involved in a bidding war:  

One, be grateful you're not alone.  You have a skilled broker who has been through this before and will make sure that in the end, everything will be all right.  (And to quote the character in the movie*, if everything is not all right, then it isn't the end yet.)

Two, decide what is the most you are willing and able to spend for this property and DO NOT GO ABOVE THAT NUMBER.

Three, if you lose, remember this:  It's okay.  There are more than 300 million people in this country not living in that apartment and not minding a bit.  

Your broker will find you another one that you will love just as much. Maybe more.

I promise.

Any questions?  E-mail or call 917-991-9549.

*"The Best Exotic Marigold Hotel."  Great cast, fun flick.