What To Expect When Buying a Cooperative (Co-op)
Almost 75% of NYC apartments are Cooperatives (Co-ops). Co-ops are not a new concept for New
Yorkers, but many out-of-towners are unfamiliar with this type of ownership.
When purchasing a co-op a purchaser does not buy real estate but purchases an assigned
number of shares of stock in a cooperative corporation. The ownership of these
shares allows the Purchasers to occupy a specific unit in the building under a
“proprietary lease.”
A co-op is controlled by its Board of Directors which is usually composed of current residents or in some cases still controlled by the sponsor or an investor. The boards of directors make all of the major decisions about the operations of the building and the rules which tenant-shareholders must follow. The Board has broad powers including the ability to turn down a potential purchaser of a unit without giving a reason. Almost all co-ops require a Board interview prior to allowing a sale of a unit in the building. As part of the application process to purchase a co-op you may be required to reveal all of your personal financial information and provide verification for any asset you may have.
If you plan on financing your purchase we recommend you seek a pre-approval for financing before starting your search for a property. Once you have identified the Co-op you want to purchase and your real estate broker has submitted an offer, it will now be the time to call a real estate attorney (212.265.4900).
Assuming you have already called and hired us we will start our Due Diligence. We start by reviewing the Offering Plan and its Amendments. The Offering Plan, which can be as large as the phone book, address disclosures of any property defects; building description; board and sponsor; purchasing and operating procedures; parties’ rights and obligations, etc. The older the offering plan the less relevant it will be, however it is still critical that we review it.
Once we receive the Contract of Sale from the Seller’s attorney we will confirm all of the information and negotiate the contract on your behalf. Once the negotiation is finished and we have gone over our due diligence with you, you will sign the Contract. The Contract, along with your down payment check (typically 10% of the purchase price), is then sent to the Seller’s attorney for the Seller’s signature. Once the Sellers have signed and the down payment check has been deposited into the Seller’s attorney’s escrow account you are “In Contract”. Your Contract will probably have an on or about closing date, however in New York a reasonable period, generally accepted to be around 30 days, is given to both parties to close.
Once you are “in contract” we order a Lien Search from an abstract company. The Lien Search will disclose all existing liens against the cooperative corporation and the unit you are buying, as well as the Seller.
If you will be financing the purchase, once In-Contract, you will work with your mortgage representative to obtain your loan. It is important to remember that if you do not have a mortgage contingency your inability to obtain financing will not let you cancel the Contract of Sale. If you do have a mortgage contingency clause, typically 30-45 days from the “contract date”, and are unable to secure financing, you can cancel the Contract of Sale and receive your down payment back. The loan commitment letter will be issued with a few conditions that you will need to satisfy prior to closing. Typically once the loan commitment letter has been issued by the lender your contingency period expires. If you are unable to obtain a loan commitment letter in the contingency period you will be able to terminate the contract (a seller may grant you an extension of the contingency period).
At the same time you are working with your mortgage broker you will be working with your real estate broker preparing the board package. As mentioned above as part of the application process to purchase a co-op you may be required to reveal all of your personal financial information and provide verification for any asset you may have. The Board has broad powers including the ability to turn down a potential purchaser of a unit without giving a reason. If you are not unconditionally approved by the board the contract may be canceled and you will be entitled to your down payment back.
Once you have satisfied all of your loan conditions and obtained a clear to close from the lender and have gotten board approval it is time to schedule the closing. We will work with the seller’s attorney, lenders attorney and managing agent to schedule a mutually agreeable time. The closing typically will take place at the managing agent’s office.
Prior to closing you and your real estate broker will schedule an inspection of the unit. During this inspection you should turn on all light switches and appliances and check the windows and walls for any damage that was not there when you signed the contract.
Prior to closing we will send you a statement that will show guide you through all the steps of the closing from what documents you will need to bring to what checks will need to be written.
Once closing day comes around we will explain all of the relevant documents to you prior to signing them. After closing you will receive a binder from us containing all of the relevant documents from the transaction.
You then get to live happily ever after in your new coop until of course it is time to sell and buy a new property. When that time comes we hope you will give us a call again.
A co-op is controlled by its Board of Directors which is usually composed of current residents or in some cases still controlled by the sponsor or an investor. The boards of directors make all of the major decisions about the operations of the building and the rules which tenant-shareholders must follow. The Board has broad powers including the ability to turn down a potential purchaser of a unit without giving a reason. Almost all co-ops require a Board interview prior to allowing a sale of a unit in the building. As part of the application process to purchase a co-op you may be required to reveal all of your personal financial information and provide verification for any asset you may have.
If you plan on financing your purchase we recommend you seek a pre-approval for financing before starting your search for a property. Once you have identified the Co-op you want to purchase and your real estate broker has submitted an offer, it will now be the time to call a real estate attorney (212.265.4900).
Assuming you have already called and hired us we will start our Due Diligence. We start by reviewing the Offering Plan and its Amendments. The Offering Plan, which can be as large as the phone book, address disclosures of any property defects; building description; board and sponsor; purchasing and operating procedures; parties’ rights and obligations, etc. The older the offering plan the less relevant it will be, however it is still critical that we review it.
Once we receive the Contract of Sale from the Seller’s attorney we will confirm all of the information and negotiate the contract on your behalf. Once the negotiation is finished and we have gone over our due diligence with you, you will sign the Contract. The Contract, along with your down payment check (typically 10% of the purchase price), is then sent to the Seller’s attorney for the Seller’s signature. Once the Sellers have signed and the down payment check has been deposited into the Seller’s attorney’s escrow account you are “In Contract”. Your Contract will probably have an on or about closing date, however in New York a reasonable period, generally accepted to be around 30 days, is given to both parties to close.
Once you are “in contract” we order a Lien Search from an abstract company. The Lien Search will disclose all existing liens against the cooperative corporation and the unit you are buying, as well as the Seller.
If you will be financing the purchase, once In-Contract, you will work with your mortgage representative to obtain your loan. It is important to remember that if you do not have a mortgage contingency your inability to obtain financing will not let you cancel the Contract of Sale. If you do have a mortgage contingency clause, typically 30-45 days from the “contract date”, and are unable to secure financing, you can cancel the Contract of Sale and receive your down payment back. The loan commitment letter will be issued with a few conditions that you will need to satisfy prior to closing. Typically once the loan commitment letter has been issued by the lender your contingency period expires. If you are unable to obtain a loan commitment letter in the contingency period you will be able to terminate the contract (a seller may grant you an extension of the contingency period).
At the same time you are working with your mortgage broker you will be working with your real estate broker preparing the board package. As mentioned above as part of the application process to purchase a co-op you may be required to reveal all of your personal financial information and provide verification for any asset you may have. The Board has broad powers including the ability to turn down a potential purchaser of a unit without giving a reason. If you are not unconditionally approved by the board the contract may be canceled and you will be entitled to your down payment back.
Once you have satisfied all of your loan conditions and obtained a clear to close from the lender and have gotten board approval it is time to schedule the closing. We will work with the seller’s attorney, lenders attorney and managing agent to schedule a mutually agreeable time. The closing typically will take place at the managing agent’s office.
Prior to closing you and your real estate broker will schedule an inspection of the unit. During this inspection you should turn on all light switches and appliances and check the windows and walls for any damage that was not there when you signed the contract.
Prior to closing we will send you a statement that will show guide you through all the steps of the closing from what documents you will need to bring to what checks will need to be written.
Once closing day comes around we will explain all of the relevant documents to you prior to signing them. After closing you will receive a binder from us containing all of the relevant documents from the transaction.
You then get to live happily ever after in your new coop until of course it is time to sell and buy a new property. When that time comes we hope you will give us a call again.