"Running the Gauntlet" by amber in norfolk on Flickr.
One of the most pernicious aspects of purchase approvals by the boards of co-operative apartment buildings in Manhattan has to do with price.
Boards have an obvious interest in analyzing whether prospective shareholders have the financial resources to keep their monthly maintenance charges from falling into arrears.
They also want to ascertain, so far as possible, whether the buyers will be involved and pleasant members of their small community. Are they nice? Do they give big parties? Are they noisy? Does their application appear to be truthful?
Some boards also like to determine whether the applicants are the “right” people. That’s one of the two qualifications with which I take issue. Obviously, boards reflect the larger society in that respect, and I suppose some progress may have been achieved. But consider the tales of board rejections collected by Habitat magazine if you think times have changed all that much.
What troubles me a great deal is a board turndown on the basis of the sale price of the apartment that the buyers are hoping to purchase.
If the price is too low in the board’s estimation, there goes the deal. The concept is that, because comparable sales always are taken into account, a low price will drag down the value of all the co-ops in the building.
Even if that’s true, it’s wrong.
What brings this concern to mind is a transaction that doesn’t involve me, but other brokers who find themselves deeply worried that a hard-won sale is in jeopardy once it reaches the board. (I am altering all the facts in this anecdote to protect the transaction and all concerned, but I am describing an essential truth that all too frequently is replicated.)
The apartment was a difficult sale all along: The seller set limitations not only on when the apartment could be seen, but which rooms; the unit was in estate condition; the price was too high from the beginning; and then the listing brokers were forced by the seller to chase the market down.
Listed for several million dollars in an indisputably prime Manhattan location, the price was dropped just below an even number and reduced two more times. The highly qualified prospective purchaser bottom fished by several hundred thousand dollars and then even more after the final price was cut while that bidder dithered.
Finally, there was a meeting of the minds far below the price of any comparable co-op in the building. The co-op board package was submitted last week, but the brokers and I have serious doubts whether the buyer will be granted a board interview–just because of the sale price.
(Some brokers conspire to inflate the sale price by making it higher on paper but lower in fact with the provision of a “renovation” or “decoration” credit from the seller.)
Comes a board rejection, everyone, including the desperate seller, will be back to that square we know as “1″ only because of the board’s self interest, which ignores special circumstances and the vagaries of the housing market.
As a shareholder and former board president myself, I can understand the impulse to protect existing shareholders’ investments. What I don’t understand is shortsighted and immoral behavior
The impulse is one that must be squashed.
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