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Once you've navigated the open houses, found a co-op or condo that you love, and made an accepted offer, the next step in the purchase process is to prepare your application package. This is necessary to show a co-op or condo board that you are a qualified owner, with the finances to back it up.
Of course, the process is notorious for feeling invasive: The scrutiny of your tax returns and financial statements, as well as the need to provide personal and professional recommendations, can feel excessive. Remember, however, the ownership structure of a co-op means you are becoming a tenant shareholder of a corporation and the due diligence is all part of accepting candidates who will contribute to the building’s financial wellbeing.
[Editor's note: An earlier version of this post was published in September 2015. We are presenting it again with updated information for January 2020.]
In recent years, condo packages have started requiring similar amounts of paperwork and in some cases, even an interview. For a list of everything you’ll be expected to provide, read ”How to make your co-op or condo application package rejection-proof.”
For tips on how to assemble your application package most efficiently, read on.
1. Start prepping early
It’s your job to get all the documentation together but a broker can help you with the presentation and make sure there are no omissions.
Usually, there are one or two rounds of back-and-forths between the broker and the buyer, says Ari Harkov, an agent with Halstead. You can cut down on time between offer and closing if you are well organized. “Most contracts require packages to be submitted within a certain time frame. Be sure to check your contract and consult with your attorney so you know what dates and deadlines you need to meet,” Harkov says.
In an effort to reduce paper and cut down on copy and messenger fees many board packages are now submitted online says Caroline Surace, director of transfers at Halstead Management Company.
2. Follow directions
You can never be too prepared. A management company or brokerage will send you a guide explaining exactly what you need to include in your package. "It seems obvious, but people don't always do it," Surace says.
Your broker can provide samples of application documents and starting early gives you time to request any necessary statements.
You should also have your broker reach out to the seller’s agent to find out exactly how the board wants the package delivered. Some boards want to give every member a hard copy of the package, so you’ll have to make lots of duplicates. Others will ask you to print out one copy and will share it amongst themselves, says Betsy Hoffman, a real estate salesperson with Engel & Völkers Brownstone Brooklyn.
“There is a hope that in the digital age, we don’t have to print everything out, but it's so board specific, that’s why it’s important to ask before you do it, because things have changed,” she says.
Regardless of how much paper you’re printing, "the best packages are the ones that are the most organized," one Upper East Side co-op board treasurer tells us.
The bottom line: Include everything asked for and don't put in more than you need. A big no-no: pictures. "We don't care about what your house in the Hamptons looks like and we don't really care what you look like," she says.
Remember that in addition to financial information and reference letters, your co-op or condo application must include a written insurance quote or active insurance policy—on an apartment you are not even approved to buy yet. Fortunately, the co-op and condo insurance insurance experts at Gotham Brokerage can provide exactly what you and your board need in a fraction of a business day. They’ll also swiftly accommodate any changes (for example, if your closing is delayed), and fully refund any policy costs if you don’t complete your purchase for any reason. Click here to get started.
3. If you're financing, you'll need a commitment letter
Co-op board requirements vary from building to building but there are some nuts-and-bolts requirements: financial statements that show assets and income, specifically tax returns and bank statements. "Those are the heart and soul of the package in broad strokes," Harkov says.
“In today’s lending environment, many banks are taking at least 30 days and closer to 45 days to issue commitment letters,” he points out. And remember to stay on top of the letter’s expiry date—this kind of oversight could become a sticking point for a seller.
Usually, the board will want two years of tax returns and your most recent bank statement. When it comes to stocks and retirement account reports, the most recent paperwork is usually fine.
4. Include a cover letter and table of contents
A cover letter and table of contents lets board members easily find what they need.
Harkov makes a point of supplying two cover letters: “One is the table of contents and one explains who you are, [where] you put your income, your assets post-closing, and your debt-to-income ratio. So if a board member doesn't want to read the whole package, they can get everything they need from these two parts," he says.
5. Flattery will get you everywhere (only if you're sincere)
"Compliment the building—honestly—in the buyer's intro letter, because every member of the board chose to live in the building," says Hoffman. "By adding a few lines highlighting the pros, it's a great way to acknowledge the smart financial choice they once made,” she says.
Hoffman’s advice is to make it “more than just about the dollar and cents of who you are” by adding the human touch of how neighborly and friendly you are.
6. Don't leave any blanks
Co-op board members are volunteers (with jobs and families in many cases) and they don't want to spend a lot of time going back and forth asking for more information—plus the longer it takes for them to approve you, the longer it'll take to close on your apartment. According to Surace, one mistake for buyers paying cash is not showing that amount of cash on the financial statement, leaving the board to wonder where you’re getting the money from.
"Sometimes people will say there will only be two occupants in the apartment, but their tax returns show they're liable for other people," says Surace. "You need to explain that."
Discrepancies need to be clarified. "Our building doesn't allow for new pets," says the UES co-op board treasurer, "but sometimes people say their pet is therapeutic. If that's true, we need documentation to back that up."
The idea is to preempt any questions. For example, if you're recently divorced be prepared to give detailed information about alimony payments, whether you give or receive.
7. Choose references wisely
Make sure references are well written and typo-free.
"Pretty much every co-op will ask for some amount of reference letters," says Harkov. "They fall into several categories: An employee letter, which comes on company letterhead and verifies your compensation; a business reference letter from a superior or colleague, which offers substantive feedback about you in a work environment, including details on how responsible you are; a personal reference letter, and a letter from your current management company confirming that you pay rent or monthlies on time."
Specificity is key when it comes to references, says Harkov. "You want your references to include details like, 'she helped me when my kids were sick,'" he said.
One Yorkville co-op board member puts it this way: "What separates one applicant from the next is the personal aspect—specifically, the recommendation letters. Because when it comes down to it, once we are all in agreement that the applicants have the financial capacity to purchase, we really just want to see if they will make nice neighbors. Who are they asking to recommend them? Do they read like boilerplate or do they really tell me that these are good, nice people?"
Two high school teachers who bought a co-op in Forest Hills, Queens, told us they were certain their “Disney-style” letters of recommendation were what clinched the deal for them.
So who should write your personal reference letter anyway?
References should be from colleagues or friends who can speak honestly about you. If they are NYC co-op owners so much the better. “The idea is to use someone who gets how important it is to have good neighbors and can vouch for that fact that you would make one," says Harkov. If you know someone who’s a board member on a NYC co-op or already lives in the building—even better.
For more tips, we have samples of reference letters addressed to co-op boards.
8. Double and triple check the package
"Multiple qualified eyeballs are always a good thing," Harkov says. The buyer's broker pulls the package together, but the seller's broker, the managing agent, and even the lawyer should review it. Check for typos and see if anything stands out that needs a correction.
9. Don't expect condo board packages to be easier
Condos can be equally cautious about who they are letting into their building. As a condo buyer, this should reassure you. Hoffman says, “Just doing the exercise shows the board is taking the finances [of buyers] seriously and the hope is you are one of many neighbors who have gone through this to make sure you are stable and no one is going to default.”
10. Bring your A-game to the interview
The best approach is to treat the interview as if you were applying for a job. Dress appropriately, and be respectful, and friendly. If you’ve spent the time preparing the application you should know your package inside and out so you won’t get tripped up by any questions about it during the interview.
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