I
have been receiving a lot of questions about Coop Apartments, what
they are and how the operate. A Coop is a corporation made up of all
the occupants of the building. When You buy a Coop you are not buying
an actual unit, you are buying shares in a corporation. You will
receive a stock certificate and a proprietary lease which entitles
you to occupy the unit.
Since
the occupants do not own the unit they do not pay property taxes like
you would in a condo or house. You pay a monthly maintenance fee
which includes your pro-rata share of the buildings property taxes,
and care for the grounds, etc. If in NY you will qualify for the
basic STAR reduction but will have to inquire with your particular
Coop to see how they handle it. There are additional fees that vary
from parking, assessments, flip tax, storage, etc. Again each
building is different and you will have to inquire about any
additional fees. There is a percentage of your maintenance that is
tax deductible, usually 45%-55%, but it can vary. There is always a
minimum down payment requirement which can range from 10%-50% down,
depending on the Coop. Nowadays alot of Coops are requiring 20% down
to protect themselves and make sure only the qualified apply. Even
the banks are requiring this so times have changed a bit. On occasion
you will find a "Sponsor Unit" available. This is a unit
that is on the market by the sponsor for the first time. These are
highly sought after because they usually don't require a board
interview. This is good for the first time only, the next time it
goes on the market a board interview will be required. Keep in mind
just because at first you don't need an interview the board usually
still looks at the package.
When
purchasing a coop part of the process is a board interview. Many
people get scared and worry about what it will be like. Once you have
an accepted offer on a unit you will receive a board package to fill
out. This includes a standard application, request for financial
information (bank statements, W-2s from previous and current years,
pay stubs, etc.) Here are a few major things the board will look
at...1) Amount of down payment, where it came from, and how much you
have in reserve after making it. Most Coops want to see a few months
reserves at least. 2) Credit scores, do you have any judgments
against you, how much debt you have. They look at your "Front
End Ratio" which is how much debt you'll have with just housing
payments and "Back End Ratio" housing debt along with any
other existing debt you have; credit cards, loans, etc (student loans
sometimes get deferred, you'll have to inquire). They will have a
debt-to-income ratio requirement which can vary. 3) Current Income is
important as well, they want to see that you make enough and aren't
spending everything you have to pay your bills. Having a lot of cash
in the bank doesn't impress them, that can be spent quickly. You will
also get a copy of the by-laws (house rules) and the offering plan.
The offering plan tells how many units are in the building, what the
existing mortgage is on the building, how much the building has in
reserves, etc. You will have a chance to review these with your
attorney to make sure you are buying into a financially sound
building.
The
application can be a bit intrusive but the Coop does this to make
sure that they don't take on any financial liabilities to the
building. They will only hurt the corporation. Once the package is
complete it can be submitted for the management review and once they
approve it, it's then passed on to the board members. Once the board
reviews you will be contacted to come in for an informal interview.
They might ask questions regarding your motivation for buying in the
building, questions about your finances, or just general questions to
get to know you further. They will have a pretty good sense of who
you are by your package already.
My
advice to you...stay calm, don't over answer their questions, be
positive! At times you will find out right away if you are approved
and others you will be notified the next day, or so by the management
company. The approval needs to be in writing and sent to the
attorneys on the deal to make it official. Once approved you can
finalize everything with the bank and setup a closing. I hope this
answers some of your questions and I welcome any further inquiries.
Christopher Pagli - www.WestchesterCountyRealEstateMarket.com
Accredited Buyer Representative
Real Estate Associate Broker
William Raveis Legends Realty Group
914.332.6300 office
914.406.9023 cell
chris@LegendsRealtyGroup.net
