Articles Posted in Cooperative and Condominium

After a long search, you have finally located your dream apartment.  In New York, such an apartment is likely to be a cooperative apartment.  You have been fortunate enough to obtain your loan commitment.  Are you ready to close?  No, because you now need approval for your purchase from the board of the cooperative.  Such a condition is contained in the form contract for cooperative purchases.  This post will discuss what is entailed in obtaining cooperative board approval.

The contract will specify a timeframe for the submission of your board application package.  Your attorney should monitor this deadline, along with other deadlines to confirm that you have made the submission within the proper timeframe.  It is preferable to work with a professional real estate agent who is familiar with the building or its managing agent, so that the board package is prepared in a manner pleasing to the board.  Typical items for submission include financial records such as bank statements, and personal and professional letters of reference, along with the completed board application and credit check authorization.  Each building specifies the number of copies required to be submitted.  Most buildings will require that the application not be submitted unless it is also accompanied by a loan commitment letter from your lender.

The managing agent will review the application with the building’s interview committee (usually a smaller portion of the board).  If such application on its face is not acceptable to the board (usually for financial reasons), they will decline to interview the candidate.  This is a wise move, so that the board is not accused of discrimination in the event that the applicant happens to be a member of a protected class, which is not discoverable unless the applicant is met face-to-face.  Otherwise, the board will schedule the interview.  Potentially during the summer months or holiday season, meetings may occur more sporatically.

In a prior post , we alerted our readers that the HUD real estate closing form as they knew it would be disappearing from closings.  In a later post , we informed our readers that the new loan closing disclosure rules were in effect.  Several months after the implementation of these rules, we would like to share with you our observations of how clients have been dealing with these new rules.

Fortunately, we have experienced a busy home transaction season.  On the flip side, we have observed that transactions are closing approximately one month later than they did prior to the implementation of these new rules.  The exception to later closings is when a transaction is all cash, which does not require these disclosure documents and the mandatory waiting periods involved.  Longer closing timeframes are a result of lenders taking longer to issue the loan commitment, evaluate collateral, and clear the loan to close.  Even if the buyer and seller are ready and anxious to close, the lenders have been disregarding the will of the parties because they can incur substantial fines for failure to provide timely disclosures under the new regulations.  Lenders may also need to refund money to borrowers if the closing costs are higher than were disclosed.  The mandatory disclosure timeframe can be shortened in rare circumstances, such as an actual emergency.  An emergency is not that a buyer is going to have a baby imminently and wants to get settled, but is when a buyer may lose her downpayment by needing to react to a time of the essence closing notice or if the property is about to miss a short sale closing deadline .

Lenders have become much more inconsistent and conservative in recent months.  We have found that most lenders are internally deciding to require disclosure timeframes that are longer than required by law.  We have noted that one regional lender has required that even more time pass than required than a major national lender that is complying with the law.  A lender that is open for business on Saturday may seem to get the parties to closing faster because it can count Saturday as one of the disclosure days.

Sellers of real estate in New York  perceive the current market as one with a tight inventory for desirable properties.  In such a market, multiple offers may be available to a seller.  In order to select one offer over another, a seller may demand that the buyer who intends to obtain a mortgage waive the standard mortgage contingency clause in the proposed contract.  This post will discuss whether waiving the mortgage contingency is a risk that a buyer should take.

In a typical New York real estate contract, various contingencies (conditions) need to be met between signing the contract and closing.  Some of the conditions usually include proof of clear title, a satisfactory appraisal , approval of the finances of the cooperative building and the like.  If the conditions are not met, the downpayment will be delivered to the seller or the buyer, depending on the circumstances.

A mortgage contingency clause works as follows.  After the contract is signed, the buyer is afforded a particular number of days to obtain their loan approval.  If the buyer does not obtain the loan, he can show that the loan was declined and request the refund of the downpayment.  During this period of time, the seller is required to remove the property from the market and is relying upon this particular buyer to close.  If the buyer has a valid legal right to cancel the contract and receive the return of his downpayment, the seller has lost potentially two months in being able to market the property again.  In New York, missing an opportunity to market the property during the Spring and Summer seasons could cause the property to be overlooked by buyers until the following Spring, because most contracts are signed in the Spring and Summer months.

It’s that time of year again.  This author is not thinking about the chirping birds and blooming trees heralding the beginning of Spring. We are thinking about another sign of the season– the first time home purchaser.  This post will address issues pertaining to the person buying a home, whether a house or a cooperative or condominium apartment, for the first time.  Even if a person has owned a home in another state, real estate in New York is its own animal.

The most important aspect of our advice is that the first time homebuyer should surround himself with seasoned experts throughout the process.  In addition, let the experts do their work without your interference.  It is usually better for a first time homebuyer to work with a licensed real estate agent and to buy a property that is listed with a real estate agent, as opposed to buying a home that is listed for sale by owner.    That way, the real estate agents will resolve many of the issues that commonly develop in a transaction.  If both parties are not represented by real estate agents, then the buyer may not know how to best negotiate a favorable price.  Comparable sales should also be evaluated to determine the proper price to be offered by a buyer.  A real estate agent knows the area best, but also has the resources to locate the comparable sales data and to evaluate the data properly.

The first time homebuyer should also get his finances in order.  He should become acquainted with a potential lender or mortgage broker prior to making offers.  His offer is more likely to be accepted if accompanied by a pre-approval letter, so that the seller is comfortable with taking the property off the market for this buyer.  In addition, the proposed lender or mortgage broker may note possible deficiencies in the buyer’s potential loan application, such as inaccurate credit concerns, the necessity of reducing debt and the like.  Given the amount of the typical downpayment to purchase a property in the   New York metropolitan area, first time homebuyers may need a gift from their parents or other relatives to pursue the transaction.  The buyer should discuss this with the appropriate person in advance.  Further, once the gift is made, the parties need to be prepared to show the source of the gift, such as copies of bank statements before and after the gift, from the parent and the child.