Frederick Peters | President, Warburg Realty
There is a widening gap between the price of co-ops and the price of new condominiums. While much of this has to do with the ease involved in purchasing something utterly new, there is also a considerable benefit in the eyes of many buyers to the fact that they do not need to contemplate preparing and submitting a Board package. This comprehensive amalgam of financial and social information, which every applicant must submit in order to be approved by the co-op’s Board of Directors before the purchase can be completed, intimidates many buyers, as well as requiring the revelation of very personal information. But the great buildings along the famous avenues both uptown and downtown are mostly co-ops, and for the buyer who wants to live in one, the Board package simply becomes one of the necessary steps. While we as agents cannot control how long buildings take to review and pass on the information we submit, we can make the process easier for the buyer. Here are some tips about how to facilitate your Board package preparation experience:
- Meet with your agent immediately after making the deal. You should receive a list of the building’s requirements from your agent, which the two of you should then carefully discuss. Assembling the package requires expertise and an understanding of nuance, both of which your agent should provide.
- Understand the personality of the building in which you are buying. No two co-ops have exactly the same personality. Some care most about money, some are rather clubby, some care a great deal about philanthropic commitments. It is critical to understand which sort yours is.
- Plan your letters like a military campaign. Remember, the package is intended to introduce you to a group of people who don’t know you but will be your neighbors. They want as complete a picture of you as possible. So four three-sentence letters saying “Bill is a really swell guy” are not adequate to this task. You need letters of several paragraphs from people who know you well, ideally representing several aspects of your life and that of your partner (if you have one). Information about charitable work, schools for you and your kids (if you have them), your family of origin, what you enjoy – all of these belong in the mix.
- Make your financial disclosure clear and comprehensive. The numbers on the front statement MUST match the numbers in the back-up you are providing. It is best to pick a month-end day, usually the end of the previous month, around which to organize your presentation. Be clear and concise about non-liquid assets such as privately held companies or real estate: have them evaluated by a professional who describes clearly the methodology used to arrive at the value being stated.
- Be prepared for additional questions or requests. Boards do often come back with additional questions, although in general the more thorough the package, the less likely the need for more information. Warburg prides itself on having a particularly high-level Board package review process, on which we are often complimented on by both Boards and managing agents. Nonetheless, sometimes the Boards need extra information to make the best decision.
- Escrow requests are on the rise. An increasing number of deals, in which the Board feels concern about either the amount of liquid assets or the amount of non-bonus income, elicit requests that the buyer place a year or two of maintenance in escrow as protection for the building. Although occasionally this causes a disruption of the deal, more often than not buyers try to comply, perhaps negotiating a little with the building about the terms. Ten years ago we did not see this request often; today it has become commonplace.
It’s best for buyers to approach the Board process with both patience and an open mind. Generally speaking, Board members are trying to discharge their fiduciary responsibility towards the building in the requests which they are making. The clearer and more comprehensive your original package is, the better your chances are of sailing through to an approval with little trouble. Board package (and interview) preparation is one of many touch points at which your agent’s expertise should facilitate and help organize the process for you. We have done this many times before. Please let us help you!