Unless you’re buying a new construction condo or a co-op sold directly by the building’s sponsor, your purchase usually must be approved by the co-op or condo board. This involves submitting a 45-page-long, invasive, much bemoaned application package assembled by you and your broker that includes tax returns, personal and professional recommendation letters, financial statements and much, much more. Some applications only reach back a couple of years; others go all the way back to the day you graduated from college.
As explained earlier, condos may make you work just as hard as a co-op, but basically have to accept you, unless they exercise their right of first refusal and buy the apartment out from under you. This almost never happens. And in new construction, there is not even an application package.
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.
There are also a couple of situations in which a co-op cannot reject you:
- “Cond-ops” A few buildings (sometimes referred to as “cond-ops” for their condo-like approvals power) are actually forbidden by their own bylaws from turning down a buyer who satisfies basic conditions for buying .
- Sponsor sales If you buy a co-op directly from the sponsor, you will not need to be approved by the board. For more about sponsor apartments, read our guide.
The vast majority of rejections occur before the co-op board interview, based solely on your application.
Co-op boards do not have to explain why they rejected you. So although, legally, they must abide by Fair Housing Laws and not discriminate on the basis of race, religion, family status, etc., the fact is that anything can and probably does happen behind closed doors and sealed lips.
The possible and not always obvious reasons (most legal, some not) for rejection based on your application include:
- The size, breed, temperament, etc., of your dog.
- The board suspects you plan to use the apartment as a pied a terre rather than your primary residence.
- You are buying the place for your grown kids.
- You need a guarantor to afford the apartment.
- You won’t have enough cash left over after buying the apartment to meet “liquid reserve” requirements, which can range from $25,000 all the way up to 1x to 3x the purchase price of the apartment.
- You don’t have a strong enough presence in the United States (where will they sue and collect money if you default on the maintenance).
- You are a musician (noisy), record producer (like to party), or attorney (litigious).
- You are an at-home music teacher (noise + lots of visitors) or operate some other objectionable home-based business.
- You have a history of being litigious and/or suing a former neighbor, board or landlord.
- You posted stupid pictures of yourself on Facebook that suggest your lifestyle is not an ideal fit.
- You are paying too little for the apartment (it will drag down property values for the whole building).
- There are discrepancies in your financial package that have not been adequately explained.
- Your income relies too much on discretionary bonuses or on commissions.
- You haven’t been at your current job long enough.
- The board members are worried that the price is too low and will hurt the building’s property values (more common in a buyer’s market)