Whether you’re buying a co-op or condo, chances are there will be a few hoops for a perspective buyer to jump through in order to gain purchase approval from the co-op or condo board. As mentioned in my “Co-ops vs. Condos” article, a co-op board has the right to turn down any perspective buyer without giving a specific reason (although the reasoning is supposed to be financially based). A condo board, on the other hand, has what’s called the “right of first refusal,” which grants them the right to buy the property themselves rather than allow it to be sold to an outside buyer.
The first step in gaining board approval involves presenting a “board package” to the board of directors. (If you are working with a broker, they will take care of all of this for you – it’s one of the great advantages to having a broker working for you when you buy a property!) The contents of these packages vary from co-op to co-op, condo to condo, but be prepared to hand over A LOT of personal information – even if you’re paying cash for the property. At the very least, most boards will want to see:
• Past 2 years tax returns
• Recent bank and brokerage statements
• A letter from your employer stating salary and length of employment
• Credit history (they usually charge a fee – around $50 to $100 per person -- to run their own credit check)
• Personal reference letters
• Business reference letters
The “financial section” of the board package is usually the most daunting. Most boards require a signed financial statement similar to the one submitted with your initial offer (see the section on “Making an Offer” for an example). Behind that signed financial statement, a perspective buyer needs to include proof of all numbers on the statement (in the form of bank statements, property deeds, etc.), and it’s extremely important that all the numbers match up. In the case of many purchasers who have a large amount of assets, this means including statements from each and every bank, brokerage and retirement account, deeds and recent valuations for all real estate owned, proof of investment in their own business (in the form of a CPA letter), etc.
It’s important to remember to make the package as easy as possible for a board member to read and understand. Create a trail that’s simple to follow. Where necessary, circle numbers and write notes on statements so they have a clear picture of where all assets are coming from.
When I create board packages for buyers, I always separate each section of the package with a colored piece of paper labeled with a title corresponding to each item on the board’s list of inclusions in the package. For example, let’s say the board asks for 8 different things to be included in the package: completed purchase application; past 2 years’ tax returns; financial statement and supporting documentation; employment letter; personal reference letters; business reference letters; completed credit check authorization; and signed lead paint and window guard forms. I would type “Completed Purchase Application” on one piece of colored paper and put that before – you guessed it – the purchase application. This, of course, would be repeated for each section and, for those sections that can be broken down into further subsections (like the financial statement and all that supporting documentation that goes along with it), I normally use a different color divider and label those subsections, as well.
(If you’d like to see a completed sample board package, feel free to e-mail me at Kelley.Vick@corcoran.com and I’ll send one over to you.)
Once the board package it turned in, condo buyers simply need to wait for word from the board as to whether or not they’ve been approved. Co-op buyers, however, have one more step in the approval process: the board interview.