HOW TO BUY A CO-OP
WHAT IS A CO-OP or COOPERATIVE?
CoOps are not "real property" like a house or condominium. CoOps are shares in the "cooperative". The purchaser or "cooperator" buys shares in the cooperative. Also, purchasers are given a "proprietary lease" with the right to own the subject appartment, if the purchaser "buys" the correct amount of shares for that appartment.
WHAT DO I OWN IN A CO-OP APPARTMENT?
Let's begin with what does the puchaser not own: Windows, the pipes in the wall, the electrical wires in the wall, the radiators, the beams that hold up the building. Purchaser must take care of these items and never damage or abuse them. What does the purchaser own? Everything you can touch or see in the apartment is yours to keep and maintain. If you damage a wall or floor, you must repair it. The sinks are yours and the toilet is yours. Interior doors and locks are yours, too. 1. Co-ops have restrictions. Find a "sponsor unit" that does not require passing a Board Interview. Most have down payment requirements of 10-20%. Some co-ops do not even allow pets with guests, so ask. Some have income requirements. Some allow renting in emergencies. Some have parking waitlists. You need to discuss these restrictions with your Realtor before you go out to see co-ops. 2. Go to visit the co-ops. You will make appointments to see the co-ops you selected. Photos, videos and virtual tours can’t tell you the real story. Nothing substitutes the real thing. Visit the grounds, open doors and ask questions. 3. Get Pre-Approved Only when you find a CoOp you like, do you get pre-approved. 4. Make an offer. It’s called negotiation. Your Realtor submits three documents to the Seller: -------The Offer Letter - Your name, Your Lawyer, and the Terms of the Offer ------ Your Bank Account Statement showing you have the money for the down-payment or all the "cash" for a cash offer. ------ Your Lender Pre-Approval Letter ( not more than 60 days old) 5. Contract is sent to Buyer's lawyer: The Seller’s attorney will send a contract to Buyer's attorney. The contract should be accompanied by the building’s financials, rules and regulations. This will assure that you know what you are getting into. Your attorney will review the contract. Buyer then signs the contract and puts down a "deposit". Your attorney now sends the contract back to the Seller’s attorney and Seller will sign the contract. Seller has signed the contract. This is an "executed" contract and both Seller and Buyer must abide by contract laws of New York State. You are now in contract. Buyer's Lawyer waits for the "executed contract" to be sent back from the Seller's Lawyer. 6. Get a Commitment Letter. You have been pre-approved for a loan. At this point you need a "commitment letter" from the lender that provided your pre-approval letter. The "commitment letter" tells the Seller and the Board of the CoOp you have been provided a loan by your lender, often with requirements needed to close. ------Buyer sends the "executed contract" to the lender, so a Commitment letter can be generated. 7.Apply to the Board & Pass the board. You now have to submit an application to the co-op board.Most co-ops require board approval. They will likely charge you a fee to apply ($500-$975). It varies. Remember, the boards are representatives from the building. These are your neighbors and fellow owners who want to make sure that you can afford to buy into the corporation and that you will not default. You will submit an application, a copy of your contract, a commitment letter from your lender, your financial information, bank statements, tax returns etc. You will meet the board after you submit everything and they will notify you if you pass. If you do not pass, they are not required to tell you why. Most of the time, it’s a financial reason. 8. You pass the Board Interview. Once you pass the Board Interview, you are ready to close. You will do a walk through right before the closing. If you are financing the balance, speak to your lender before the closing to make sure they have your money ready. Have a photo ID. 9. Day of "closing". At the closing table, the following people will be there: You, your attorney, your realtor, the Seller, the seller’s attorney, the seller’s realtor, the Management Company rep, the title rep, and the bank’s attorney. WHEW. All these people are there to make sure nobody pulls a fast one. Everyone has paperwork to sign. Your pen will put out more ink that day, then any other day. You will promise to pay your note. You will promise to abide by the rules and regulations of the building and the corporation. You will acknowledge that everyone told you all that you needed to know. Congratulations! You are a shareholder. You own stock in the corporation. You have a proprietary lease. You can join the board. You have a marketable asset. You have a new life. Enjoy it. Make your payments on time. Make sure to invite Shielding Realty to the party.