New York City Co-Ops dictate Agents' Income!

By
Real Estate Agent with Douglas Elliman Real Estate

I just had my first closing of 2009 today, I am very happy for the buyer who I have worked with for more than 6 months and had a Co-Op deal fell through, we got back on the market and found them a condominium.

As 85% or more of the Manhattan housing market is Co-Op, without knowing the market, it is hard to imagine how a co-op operates and how it can control/scrutinize the potential shareholder's financials and personal information.

In this current market, everyone is trying to save, downsize or consolidate, including many property owners are looking to sell their second homes, or properties to free up some equity. Those sellers who own Co-Ops, it may not be as simple!  All the buyers must be closely examined and financially approved by each Co-Op board...!!!

As recent New York Times article "Co-Op board gets Tough and Tougher", Co-Ops boards are requiring much more from the buyer to prove their financial worthiness, and "that boards are not likely anytime soon to relax rules on who can buy into their buildings. "A co-op board tends to see itself as a guardian of the shareholders who remain in a building," ..."not as a facilitator of sellers."

This boggles me quite a bit as an agent that represents Co-Op seller that had the Co-Op board application turned down... If a seller absolutely has to sell because he or she has a serious financial hardship, by denying the potential sale ( a cash out opportunity for the seller), is putting Co-Op itself in financial risk. The seller can default on his or her monthly maintenance payment... default on the mortgage... perhaps have to lower the sales price once again to generate interest, hence it brings down the building comparables...

What Gives?

(photo source: New York Times)

 

  

( Below is an Sample list of Co-Op purchase package agreement)

Does Co-Op boards realize this? As to my buyer who closed on her new condominium today, she had a bad taste in her mouth because of one Co-Op turned down... I suspect that she would not recommend anyone buying into a Co-Op anytime soon.

Posted by

 ____________________________________________________________________________

 

Eileen Hsu 許雅嵐 (email: EHSU(@)elliman.com)

Our team specialize in Manhattan New York Condominiums, townhouses, and condops.

We are condominium residents ourselves so we understand the Manhattan New York condominium community. We also enjoy all Manhattan neighborhoods, especially Upper West Side, Lincoln Square, Midtown East, Murray Hill, Financial District, Chelsea, Fifth Avenue, Greenwich Village, Nolita and etc just to name a few. If you or you know someone that may be interested in selling, buying or leasing their Manhattan New York condo, call us today (917)837-8869 or (646)644-6929 and we can discuss your specific Real Estate goals.

Manhattan New York Condo Specialists or Chinese Speaking Real Estate Agent

 

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Rainmaker
111,108
Steven Wright
Home Real Estate - Aurora, CO
CRS - Home Real Estate - 720-989-5283

Thank you for educating us on something some of us have little to no experience with. I appreciate it.

Jan 22, 2009 03:04 PM #1
Ambassador
584,041
C Tann-Starr
Tann Starr & Associates, Inc. - Palm Bay, FL

Wow. Very timely. I am aware of a board that turned down a lovely buyer who really wanted the place and the sellers are having financial hardship. Although she had the means to pay, they, the co-op board, wanted a higher household income. I don't think the $2,000 salary difference would have made much of a difference. She had a large enough down payment where the maintenance and mortgage payments were comfortably covered.

Some co-op boards are going to be the death of themselves... or one day face a class action lawsuit from a bunch of minorities who are going to claim the unreasonable house hold salary requirement is steeped in discriminating against them. It makes no sense that someone who owns a home in one state, sells it, moves here, can put 50% down, but can't buy because they make $58K and the board says you have to have an HHI of $60K. Duh? Meanwhile the maintenance is so high they have to cut checks and return portions back to the current owners a few times a year for over payment. I know they want to have a healty reserve, but they should lower the bloody maintenance. Seriously...

Jan 22, 2009 04:07 PM #2
Rainmaker
1,402,493
Vickie Nagy
Coldwell Banker Residential Real Estate - Palm Springs, CA
Vickie Jean the Palm Springs Condo Queen

We have a 55+ community nearby that has condo and co-op ownership (in different buildings of course). Guess which one has maintained higher resale values? The condos of course.

Jan 22, 2009 04:10 PM #3
Rainer
334,480
Tom Davis
Harrington ERA,DE Homes For Sale, $$ Save $$ Buy Today ! - Dover, DE
FREE Delaware Homes Search!, $$ Save $$ - Find Homes! Delaware Realtor

That is real interesting and something I don't really do here in Delaware.  It is good to learn about the co-op though... something I was taught years ago in real estate school but never had to use it here... who knows maybe one day but gee that does sound harsh!!!!

Yikes for seller right?

Thanks

Tom Davis

Jan 22, 2009 04:26 PM #4
Rainmaker
121,765
Sonny Kwan
Quantum Group Commercial - Residential - Lease Seattle, WA - Mercer Island, WA
206-819-8228

congratulations on the closing today Eileen, Are you buying donuts for the office tomorrow?

Jan 22, 2009 04:28 PM #5
Rainmaker
732,603
Eileen Hsu
Douglas Elliman Real Estate - Manhattan, NY
LICENSED REAL ESTATE SALESPERSON

Steve - Co-Op is most of the housing here in NYC, the agents here must know how it works in each building in order to successfully help the buyer pass the board and interview in order to get to the closing table!

C Tann-Starr - Yes, you are right, some Co-Op does have high maintenance... I wish we can have a debt to ratio guideline for Co-Op buildings too!

Vickie - Generally speaking, Condo does have higher resale value. Hence most of the new developments here are Condominiums, as Co-Ops aren't design for investment (sublet policy...no foreigner buying...)

Tom - Yes, it is quite yikey for sellers who must sell, especially in this tough market, it is hard enough to find a qualified buyer fits into the Co-Op requirement, it is harder to predict to see if the buyer will pass the board. Co-Op board does not always offer the guidelines to help the agents...

Sonny - No donuts, I work with ex-models and ex-actors/actresses in the office. They rather suck air than chumping down donuts. However, I will buy you a donut if you were in my office. Happy Chinese New Year!

Jan 22, 2009 11:37 PM #6
Rainmaker
622,611
Morgan Evans
Douglas Elliman Real Estate - Manhattan, NY
LICENSED REAL ESTATE SALESPERSON

Navigating the world of the co-op sale is never an easy task in today's environment. 

Jan 23, 2009 01:27 PM #7
Rainmaker
224,121
Laurie Mindnich
Centennial, CO

It's hard enough to locate a buyer without the entry exam- what a challenge co-ops could become.  Congratulations on the closing, though!

Jan 24, 2009 10:00 AM #8
Rainmaker
295,906
Jeffrey Ditri
JAD Realty Group, LLC. - Manhattan, NY
New York City Residential Rental Specialist

Eileen,

This post reminds me of a co op deal that never made it to closing. I had two buyer who submitted a co op package for a studio on East 37th & Park Avenue. After seven months went by of back and fourth phone calls, emails, faxing, you name it; they were rejected. Due to the fact of not having enough liquid income in their personal bank accounts.

Being an agent yourself, you can imagine how all parties involved felt after that phone call from the board president.

Just thought I'd share the same expienece with you!

Jeffrey Ditri

JAD Realty Group, LLC.

 

 

Feb 05, 2009 08:21 AM #9
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Rainmaker
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Eileen Hsu

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