NYC Co-op Boards Attempt To Fix Prices

By
Real Estate Broker/Owner with Gotham West Realty

It’s become apparent that some co-op boards in NYC may be rejecting sales due to purchase prices that the boards deem to be too low. This practice is not only potentially illegal but can also be very damaging to an already battered real estate market. Co-op boards who engage in such practice may be damaging the very shareholders they are trying to protect by further eroding the shareholder’s diminishing equity.

Consider the following scenario: a Co-op owner lists an apartment for sale for $200,000. The apartment is fully exposed to the open market through extensive advertising and the use of a Multiple Listing Service. After 6 months of being on the market, being extensively shown to prospective buyers, and after rejecting several low bids, the highest offer received is $160,000. The seller accepts the offer. The co-op board reviews the application and determines that the price is too low and rejects the sale. The board’s rationale is that such a sale would reduce the value of the rest of the co-op. The seller must now put the apartment back on the market and start from scratch. The problem is, however, that the apartment is now worth less than it was before. Procuring another offer higher than $160,000 is now unlikely.

Both co-op boards and sellers alike must avoid making the costly mistake of attempting to dictate to the market. Emphasis in a free market must be placed on advertising, marketing, competition, and good old fashioned sales. This allows for the the highest offer to be procured by the laws of the free market as opposed to price fixing and manipulation. Intervention by co-op boards to attempt to raise or maintain the value of their shares by fixing prices is futile and will only cause everyone to take additional losses.

To NYC co-op boards: Stop attempting to fix prices and let the market take it’s course!

ron.cohen@gothamwest.com

http://www.gothamwest.com

Comments (7)

Karen Anne Stone
New Home Hunters of Fort Worth and Tarrant County - Fort Worth, TX
Fort Worth Real Estate

Ron:  As long as the co-op board has the authority to approve or reject the sale of their co-ops based on price... this does not seem illegal.  And... what they are saying as far as affecting the values and prices of the remaining co-ops... is true.  Every low sale becomes a comp.

Sep 17, 2011 01:38 PM
Jon Quist
REALTY EXECUTIVES ARIZONA TERRITORY - Tucson, AZ
Tucson's BUYERS ONLY Realtor since 1996

If the coop board doen't like the price, let them raise the difference so the guy can sell. I would think some local lawyers could have a field day with this case. 

Sep 17, 2011 01:39 PM
Karen Anne Stone
New Home Hunters of Fort Worth and Tarrant County - Fort Worth, TX
Fort Worth Real Estate

If these restrictions... the Covenants, Conditions, Restrictions... Co-Op Board rules and regs and whatever... were all there when this particular owner first got his co-op... and he signed on as accepting them, as he would have had to... what grounds does he have to complain... other than he simply doesn't like this result ?  None that I can think of.

The co-op board exists to protect the co-op... not to prop up his sale.

Sep 17, 2011 01:55 PM
Ron Cohen
Gotham West Realty - Forest Hills, NY

In NYC, Co-ops are allowed to reject or accept applicants for "any reason" or "no reason" as long as no discrimination laws are broken. Also, as always, all local, state, and federal laws must be observed. Is it lawful for a corporation to manipulate or fix the price ot it's shares?  

Sep 17, 2011 02:00 PM
Ron Cohen
Gotham West Realty - Forest Hills, NY

A co-op board may never be able to defeat the will of the market. Any attempt to do so, illegal or not, may be detrimental to the co-op as a whole. It's just a bad practice.

Sep 17, 2011 02:04 PM
Karen Anne Stone
New Home Hunters of Fort Worth and Tarrant County - Fort Worth, TX
Fort Worth Real Estate

Fix... is a pretty heavy word.  Reject the sale of ?  Why not ?  As you said... for any reason, or for no reason.  They have control, and the buyer, now seller, knew that when he bought it.  Ya can't have it both ways.

Detrimental ?  Maybe.  Bad practice ?  Maybe.  Illegal... I bet not.

Sep 17, 2011 02:05 PM
Ron Cohen
Gotham West Realty - Forest Hills, NY
Sep 17, 2011 02:06 PM