You want to buy a co-op? Below are ten steps to ownership. A co-op is an asset like any other piece of real estate except you are not really buying the property. A co-op is not condo. When you buy a condo you are buying the actual site (like a house). In a co-op, or cooperative, you are buying shares of a corporation (which is leasing you back the place where you will live). It is a North-Eastern phenomenon that made ownership affordable. So the process is like buying a house, except usually you must get approved by your fellow share holders (the Board).
Here are ten steps to co-op ownership
1. Set an ownership goal. Your goal should say what you want with a due date for achieving it. Download a photo for motivation, write a due date on it and get to work.
2. Get pre-approved by a lender. A conditional commitment would be better. Important: Get the conditional commitment before you start looking for the co-op. This will help you avoid the foreclosure list down the road. It will also save you wasted time and energy. If your lender tells you to find your co-op first, change your lender.
3. Start researching your choices on the Internet. In Westchester you have many web sites to help you. Leverage the realtor MLS system with powerful property sites like AskHollingsworth.com. Other sites include Trulia.com, Realtor.com and zillow.com. Find your preferred area.
4. Use a realtor. Yes I am biased, but let me make my case. Searching for a home without a realtor is like sailing to an island without a compass or GPS. You will save time, money and frustration. The realtor will narrow your search, research comps for you, negotiate the deal, and help you avoid pitfalls. Make sure your realtor does a disclosure with you.
5. Co-ops have restrictions. Some co-ops have restrictions on pets. Some allow renting. Some have parking waitlists. Some have income requirements. Most have down payment requirements of 10-15%. This is a board requirement, so neither you nor the owner can avoid this. The only way around this is to find a sponsor unit that does not have this requirement. You need to discuss these restrictions with your realtor before you go out to see co-ops.
6. 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.
7. Make an offer. A co-op is worth what the market will yield, not what the owner is asking. Your realtor will know what the co-op is worth. If you like it, make an offer. Don’t worry about asking price. It’s called negotiation. The owner will either say YES, NO, or counter with an offer. If you have a number that both of you like, you have a deal.
8. Sign Contracts. The realtors obtain information from the buyer and seller…Names…addresses, etc. Owner’s attorney will send a contract to your 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. Review it with your attorney. When you are happy, sign the contract and put down your deposit. Your attorney will send it to the seller’s attorney and they will sign the contract and send it back to your attorney. You are now in contract.
9. Pass the board. Most co-ops require board approval. You now have to submit an application to the co-op board. They will likely charge you a fee to apply. 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.
10. Time to close on your co-op. Once you pass the board, 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.
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 your realtor to the party. If you would like a private co-op consultation and eligibility screening … AskHollingsworth.