Q. My husband and I signed a contract to sell our co-op, and we have a closing date "on or about" six weeks from now. The buyers still have to finalize their financing, which is a decent amount of the purchase price, and pass our relatively low-key board. When should we start looking for a rental to live in for the next year?
A. Understandably, you don't want to be stuck paying rent and the monthly carrying costs on your co-op at the same time--nor do you want to wind up couch-surfing after you move out. However, our experts say, there's no guarantee your buyer will finalize the deal on the day you’ve set out in the contract (or at all).
"An ‘on or about’ closing date"--which is a common phrase in sales contracts--"means that there is a customary ability for either side to push the closing date out another 30 calendar days,” explains Corcoran Group broker Deanna Kory.
It's possible to negotiate a deal that would let you stay in your co-op after the closing--basically a no-risk proposition for sellers, as we've previously noted--but keep in mind that buyers will be wary of a so-called "post-closing possession" (and, frankly, with good reason).
Without the right to stay past the closing, "it is not unheard of for people to end up in hotels when their [sales] deals fall through or, in the case of one of my clients, living with their children for two months in what was a reverse boomerang situation,” says real estate attorney Dean Roberts of Norris, McLaughlin & Marcus. “It is important for sellers to have clear plans and preferably a guaranteed place to land when they are selling.”
Given all the variables at play, including the speed of the rental market in New York, our experts recommend waiting until your buyer has gotten a loan commitment and passed the board--when you can be reasonably confident the deal will get done.
"You don’t want to be in the position of signing a lease, obligating you to pay the rent for the months in the lease, pay a security deposit, broker’s fees and any rent until you are fairly certain the sale is a done deal," says real estate lawyer Kevin McConnell, a partner at Himmelstein, McConnell Gribben, Donoghue & Joseph.
“Get a read from the broker as to the quality of their board package so you know if you've got a passable situation,” Kory says. “And once they're getting closer to having an interview, you could get a feel for what is out there rental-wise and then look in earnest to rent once your buyers receive board approval.”
If your board really is lax, and you’re confident your buyer will sail through, you could take a gamble and rent a place once the financing piece of the puzzle has fallen into place.
Either way, it’s wise to start your groundwork now. “Use this time to set a budget and see what's out there at your price,” says Gordon Roberts, a broker at Sotheby's International Realty. “Ask the leasing office how long it takes to process the rental application you'll be submitting, and what documentation is required for approval. " If you decide to wait until the last minute to sign a lease, try to get "pre-approved in a rental building you like that has a lot of ongoing availability," Roberts adds. "Predetermine as much as possible; it'll also help you know what furniture would ‘work’ in the new space.”
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