How to get rejected by a co-op board in New York City? Now this is not something
you want but by understanding how you might get rejected, it might increase
your chances of not being rejected. So in this video, we will demystify the topic
of co-op board rejections here in New York City. My name is Nick and I am with
Hauseit, we are the largest discounted commission platform for buyers and
sellers here in New York City so let's get started.
So getting rejected by a co-op board, it's a nightmare scenario that you read
about in the newspaper and which you might hear in conversations at a bar or
at dinner with your friends. It is something that doesn't happen very often
despite what the headlines may suggest. But if and when it does, it can be
totally devastating as far as a cost and lifestyle perspective is concerned. So in
this video, we're going to talk about some of the most obvious ways you can
get rejected by a co-op. The first way you can get rejected by a co-op is not
conforming to the buyer financial requirements and what do we mean by
financial requirements for a co-op purchaser? Well, we're referring to the
debt to income ratio and post-closing liquidity. Most coops in New York City
are very focused on ensuring that the debt to income ratio for a purchaser is
approximately 25 to 30%. So an easy way to get rejected is if your debt
to income ratio is much higher than the guidelines. Now keep in mind each
building has its own guideline some buildings don't actually state what they
are and for the buildings that do have guidelines they will also have their own
unique formula for calculating DTI debt to income ratio. For example, while one
building may allow you to count your most recent high bonus for the debt to
income ratio a more conservative building might require you to utilize it
to your average or they might not allow you to include overtime at all. In some
cases, the building might not allow passive income such as dividend or other
stock or passive investment related earnings. So as you can see, the debt to
income ratio itself can be quite complex your buyer's agent should be able to
help you navigate this and again it does vary by building. So, to minimize the
risk of a board rejection you really want to get into the weeds here and make
sure that you've done the calculation correctly and you are to the best of
your knowledge in line with the building's guidelines.
Similarly, post-closing liquidity is a measurement of how much money you have
left over in liquid assets you've closed and after you've made your
down payment and accounted for closing costs. Post closing liquidity is defined
by the number of months or years you can continue to pay your apartments carrying
costs the maintenance and the mortgage after you've closed using liquid assets
only. The devil is in the details here because co-op's a different requirements
for how much you need and B they have different methodologies to figure out
what assets you should use when calculating this. So again, you do need to
do your homework in conjunction with your buyer's agent just to make sure
that you ostensibly do meet whatever guidelines the coop may put forth.
Another easy way to get rejected by a co-op is to have a purchasing structure
that is simply not permitted by a building so what do we mean by
purchasing structure? Well, take for example Co purchasing or purchasing with
the guarantor. Each co-op will have its own set of policies restrictions on
these types of purchasing arrangements one building might permit guarantors
another might not permit co purchasing other unique forms of purchasing include
parents buying for children or children buying for parents and again all of
these cops will have policies that can tell you whether or not something like
this would be permitted. So even if a listing agent isn't concerned and you
haven't accepted offer, you don't want to sign that contract until you've
confirmed that equivocally that whatever purchase structure you have in mind
assuming it's just not you or your partner just buying a home is actually
permitted by the co-op. On a related note, gifting is something that can also be
somewhat more difficult than it may appear otherwise. In particular, each
co-op has its own policy on A whether or not gifting is permitted but B this
size of the gift. Some buildings don't like large gifts
because they liken it to a parent's buying for children scenario so you're
gonna have to double check here to make sure that the size of your gift is okay
and of course the fact that the building permits gifting in the first place.
Another easy way to get rejected by a co-op is by not following the pet policy.
Each co-op will have its own policy in terms of types of pets they allow types
of breeds they might not permit and also possibly a weight restriction. We've
heard stories and these stories are true of a buyer actually being rejected
simply because their dog is a few pounds above the weight limit and in some cases
the board members have actually weighed a dog at the interview. So again, these
things are important to keep in mind but it's also a very positive thing because
everything we've talked about thus far is something you have complete control
over. If you do your homework and follow the rules and ask the right questions
you shouldn't really expect to be rejected on the basis of any of the
things we've just talked about. Another way to get rejected by a co-op board is
by doing a really bad job at your interview. Now, the co-op board interview
is actually a very good thing to be invited to in the first place and that's
because the fact that you've been invited actually means that the co-op
board has reviewed your application and they're generally speaking okay in
principle with you being a part of the community. Another way to phrase being
invited to a co-op interview is to actually consider yourself as having
been conditionally approved for the purchase conditional of course on the
outcome of your interview. So an interview for a co-op is very different
from a job interview. In a job interview, you might be competing with 20 more
people and there might only be one job available so in that interview you have
to take risk. You have to be the one that the business wants to hire the coop
interview is not like this they know who you are and you're the only person who's
currently lined up for that apartment so the objective at a co-op interview is
really just to come across as the same person in your application and of course
to follow certain guidelines which we talked about in another video. But in
essence, at a coop interview you want to make sure that you're forthright
transparent concise with your answers and that you don't ask
obviously inappropriate such as when can I move in? do you plan
on renovating the lobby? how do I submit my renovation plan for my apartment or
anything that can be construed essentially as you not understanding the
fact that you could be rejected. So being presumptuous at a co-op board interview
are asking the wrong questions or giving off vibes like you think you already
live there is a very easy way to be rejected by a co-op board here in New
York City. Finally, one pro tip this is something that is quite important
particularly in a low interest rate environment. Many coops do not permit
adjustable rate mortgages and for some coops that do allow them they require
your debt to income ratio to meet the building's guidelines using the highest
possible interest rate under the terms of your ARM. Many listing agents are not
aware that a co-op might have restrictions on this so we have seen
instances where a purchaser moves forward with an accepted offer signs a
contract and they submit the board application with a commitment letter for
an adjustable rate mortgage when the building will require that the debt to
income ratio be calculated with a very very high interest rate. Obviously, most
buyers would not be able to meet a 25% debt to income ratio under the highest
rate of an ARM which in some cases can be 6, 7 or 8%. So another
easy way to be rejected by a co-op is to fail to figure out what policies they
have about the type of loan product and to proceed with an adjustable rate
mortgage when it might not be permitted. Now, fortunately in the case we mentioned
the co-op board was merciful and they came back and they gave the buyer the
opportunity to resubmit the application with a commitment letter for a 30-year
fixed-rate mortgage so that deal was able to move forward and silver lining
there is that the interest rates actually fell during this process so the
buyer actually got a better deal when they real opt their interest rate. But
interest rates could have gone in the other direction or more severely the
coop might not have approved him in the first place. We hope you found this video
helpful, if you are looking to buy a coop in the city visit our website now
www.hauseit.com to learn about ways to save money as a buyer and reduce your buyer
closing costs. If you like this video do us a favor feel free to hit subscribe
like and we'll see you on the next one.