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Opening your financial kimono to prospective or current neighbors is an unpleasant rite attached to buying or refinancing in a co-op. Moreover, points out Manhattan real estate lawyer Jerome Strelov in a recent post on his newish blog, TalkNewYorkCityRealEstate.com, a lot of board members don't really know how to evaluate a financial statement.
His solution: Outsource review of financial statements to an independent accounting firm familiar with the co-op's requirements.
The buyer or refinancer would pay for the review, the accounting firm would destroy all copies afterward, and most importantly, says Strelov, "shareholders need not worry that the neighbor who smirks while saying 'Good Morning' in the elevator knows their entire FINANCIAL life. They need not worry that the psychopathic board member may have retained copies of their most sensitive materials or that some person with absolutely no knowledge of reading financial materials holds all the cards in determining whether he or she is qualified to buy their dream home. In short, one’s neighbors will not see the results of this financial colonoscopy."
A solution like this is especially called for in refinancing situations, he says, "especially one that takes out more money. In these situations, embarrassing and or sensitive information need not be circulated among one’s neighbors."
While board members "would have some of their power diminished and would have to satisfy their curiosity fetishes elsewhere," notes Strelov, "...[j]ust think of how many prospective buyers would not shy away from co-ops and what that increased demand would do for co-op prices."