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Getting Approved by the Building

Photo Credit / By H.L.I.T.

1. The process, and the exceptions

Whether you’re buying a co-op or condo resale, your purchase usually must be approved by the building. This involves submitting a 45-page-long, invasive, much bemoaned application package assembled by you and your broker that includes tax returns, 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.

There are 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  (See discussion of sponsor apartments in the section entitled 'Shopping for the perfect apartment' as well as this article)

If your application is approved by a co-op board, you proceed onto the final step: The board interview.  But first….

2. Reasons you might be rejected by a co-op before you ever reach the interview

The vast majority of turndowns occur before the interview, based solely on your application.  As one Manhattan property manager shared with the NY Times, out of 350 transactions in buildings managed by his company, 20 buyers were turned down before the interview, and only 1 afterward.

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.

Here’s a brief tour of the possible, not always obvious reasons (most legal, some not) for rejection based on your application:

  • 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.  

3. The board interview

As mentioned above, the good news about the co-op board interview is that despite its fearsome reputation, the vast majority of turndowns occur beforehand based on a buyer's financial package. Attorneys have counseled their boards to do this in order to cut down on lawsuits alleging discrimination.

That means that most of the time, if you’ve gotten to the interview, the apartment is yours to lose—something will need to go very awry in the interview.

Photo Credit / Hobvias Sudoneighm

That said, here are some tips:

  • Don’t answer any questions you’re not asked; give lots of “yes” and “no” answers, resisting the urge to elaborate or sell yourself.
  • Have a copy of your application with you and be familiar enough with it to quickly and concisely answer questions about it without looking (shuffling through papers gives a bad impression).
  • Arrive on time and dress professionally.
  • Couples should decide in advance who will answer certain types of questions (for example, one spouse answers all the financial questions, and the other handles the rest).
  • Don’t ask questions, as they can unintentionally convey negative feelings or intentions such as, “Do you intend to renovate the lobby?” Plus, all your questions should be answered by now as you’ve already agreed to buy the place.

Short, cordial interviews are generally a good sign. You won’t find out whether you’re approved until later though, usually within a few days.

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