Certainly you can imagine many ways to get rejected by a co-op board, but hopefully these aren't things you'd actually do -- talk about the kickin' bachelor pad you've always wanted or arrive to a morning interview with whiskey on your breath. That said, there are many sneakier pitfalls that can hurt your chances of being accepted to the co-op.
That's mostly because co-op boards have the legal right to be rather arbitrary. The 1990 Court of Appeals decision in Levandusky v. One Fifth Ave. Apt. Corp. allows co-op boards to use "business judgment" when accepting or denying applicants [source: Kaye]. As long as decisions aren't discriminatory, the board can deny you for any and every reason it sees fit -- in New York City and most other places -- without having to explain the basis for this judgment.
Buying into a co-op is less like buying real estate than like joining a club. Instead of you owning the walls and doors of your apartment, they're owned by the club, whose share prices fluctuate in direct response to your occupancy. By living in this building, would you contribute to the club atmosphere and bring prosperity and goodness to all, or would you drill holes in the hull of the collective ship, sinking the building to the bottom of the deep blue sea? It's the co-op board's job to decide.
The following are common things that turn the tide of "business judgment" against co-op applicants.
Let's get this out of the way. Despite what we'd like to believe about shady co-op boards turning down applicants for wearing brown socks with black shoes or failure to belong to the right clubs, the vast majority of co-op rejections are due to an applicant's bottom line [source: Levy].
And don't forget that cash is king. Be realistic in your co-op hunt -- a bank's preapproval is likely to be a little stricter than you may think, and the co-op board is likely to be stricter still.
That said, more exclusive co-ops may look not only at the amount of money but also at where it comes from. While it's illegal to turn down an applicant based on occupation, the fact that most co-op boards are allowed to keep rejection reasons to themselves can make it extremely difficult to prove that a rejection is due to your job as a pop star or a personal injury lawyer, rather than a more socially appreciated job.
If it were just that easy, every co-op applicant would list $20 million in liquid assets, show a credit rating of 810 and have a closet -- financial or otherwise -- completely devoid of clanking, groaning skeletons. But it's not that easy.
Co-op boards have financial as well as social incentives to keep liars from infiltrating their clubs, so you should expect a double check on each and every thing you list in your application package. Yes, having an outsider troll through your past is like submitting to a cavity search, but the choice is yours -- if you don't want to be searched, apply elsewhere.
Specifically, it's tempting to try to sweep credit problems under the rug, but this is also one of the easiest rugs to lift. It's worth disclosing and, if possible, explaining credit problems up front, because you'll almost certainly be found out later [source: Romano].
Sitting on a co-op board is rarely, if ever, a paying position. As dogged as these people may seem, they likely have other lives full of other commitments. So the last thing anyone wants is to wade through a folder stuffed willy-nilly with your application documents. Avoid the overflowing taco.
Presumably, you're working with a broker who has experience landing clients in your chosen building. Ask your broker how board members prefer you to present information and follow these formatting suggestions to the letter. When in doubt, a document that's bound and includes color-coded tabs always looks professional.
In addition to making your application readable, taking time to organize your info shows both that you care about the outcome and that you're the type of person who dots i's and crosses t's -- both pluses in the eyes of a co-op board.
If you've ever explored real estate Web sites, you know there are ways to refine your search -- dogs or no dogs, smoking or nonsmoking, for example. The same should be true when you're first exploring co-op options. Simply, it's not worth applying with the idea of fighting the board for a one-time exemption for your 120-pound pit bull in a building that doesn't even allow cats.
Check out all the rules, starting with the required level of financing. Are you allowed a mortgage for 25 percent, 50 percent or none of the purchase price? How much cash in liquid assets must you prove, and if you're on the cusp, are you likely to be required to put a certain number of years of maintenance fees into an escrow account to ensure your ability to pay? Does the building allow subletting? If applicable, check specific pet restrictions, including species, breeds and sizes. If needed, are you allowed a guarantor? Are you allowed to use the unit as a pied-a-terre or is full-time habitation a must? Can you work from home?
The co-op board interview isn't the place to discover that you're incompatible with the building rules.
Remember when your lowball bid was accepted? You jumped up and down in your rental's decrepit little kitchen, didn't you? But getting a steal sets up one more hurdle in actually closing the deal.
If there's anything a co-op board hates, it's something that could conceivably lower their own share values. And like a judicial ruling, a low selling price sets precedent. What's real estate worth? It's worth what someone will pay for it, and if that price is shown to be low, the value of all the units in the building drops.
What does a board member have to lose by disallowing lowball sales in economic tough times? Well, the poor seller can be stuck with a unit they can't move in current market conditions, and buyers can find themselves bullied into paying a price out of whack with the times (or bullied into going elsewhere). However, the board members have nothing to lose. If they, themselves, aren't trying to sell, why not put a stranglehold on sales until conditions improve and units can once again go for what shareholders see as fair rates?
Beware the lowball bid. Even if it's accepted, you might not be.
Buying into a co-op is a decision with long-term repercussions. Co-op boards don't simply want to believe in you this year or next year, but for the next 20 years or more that they hope a buyer will live in the building. The best way these boards have to predict the future is to look at the past. How stable have you been?
This may make it a bit more difficult for the screenwriter with one big score, the man or woman on a fourth spouse, or someone who's had six jobs in eight years.
That said, most stability issues will be reflected in the specs of your application package. Making it to the interview stage implies that the board's willing to overlook your footloose past -- and you can and should sculpt responses explaining why your salary has fluctuated between $20,000 and $400,000 over the past 10 years, and why, despite this, you're now on a perfectly even keel through at least the next century.
Did you think the intricate, personalized, pain-in-the-neck application package was the last step? Nope. As if that weren't bad enough, it may only be the first paper hoop to jump through. That said, a meticulous and thorough application package can help you avoid these later hoops -- answer any and all questions up front, and it's less likely that you'll have to file more paperwork to answer them later.
For example, you should accompany every listed asset with verification -- not just a picture of your family in snorkel gear outside your vacation home in the Cayman Islands, but an official copy of the title. Likewise, you can be assured that anything you list as "other business income" will result in a request from the board to define that other income. It's better to answer these questions up front, but be aware that despite your proactive nitpicking, you'll likely need to field stray paperwork throughout the application process.
And if you let one groundball roll through your legs, you might not get another shot. In all cases, failure to jump when the board says jump is a sure way to doom your application.
The board interview is your last -- and potentially greatest -- hurdle. Do yourself a favor and show up on time. Also in the list of the should-be-obvious: dress conservatively, don't bicker with your co-applicant and be straightforward.
But outside the blanket recommendation to be understated, what matters most is that you try in your interview to fit the profile that best matches the building. Is it a notorious artists' colony, or is it blue-blooded old money? Again: Do your homework! Or better yet, have your broker do it for you.
Other specific interview suggestions include the following:
- Don't ask too many questions. You're being interviewed, not doing the interviewing, and many questions you could ask are likely to run afoul of one or another board member. For example, don't ask about subletting. And asking about 150-pound pit bulls implies that you might explore owning one.
- Avoid dropping the names of people you know in the building unless you're sure they're universally beloved.
- Be ready for a complete lack of privacy. The board will ask tough, probing questions. Don't be offended -- it's not personal, and unfortunately, it's a standard part of the process [source: Romano].
Are you a drummer? Are you planning loud parties? Did you hint that you expect a revolving cast of couch-surfing friends and relatives to show up at your door? Are you likely to bring attention to the building, and if so, would your kind of attention raise or lower the value of the property?
Like knowing building regulations before applying, it's worth talking to your broker about the "flavor" of the building. Then, in your application and interview, highlight the points of your lifestyle that fit in with this flavor and downplay those that don't.
And keep this in mind: If your lifestyle is incompatible with that of your neighbors, would you really want to live in that building in the first place?
You've heard stories about that job applicant who was rejected because of the pictures posted to Facebook, Flickr or (heaven forbid!) MySpace from a college spring-break trip 10 years ago. Well, the major difference between a job interview and a co-op interview is that the co-op interview is more personal. Nothing's off limits -- including those incriminating pictures.
So do yourself a favor: Before you turn in your co-op application, Google yourself. You can be sure they will. And if what you find paints you in a light that's a little less than complimentary, do what you can to clean it up. Delete or retag photos, cancel outdated social media profiles and update existing ones.
But as anyone under the age of 35 seems to understand, the best defense against the black cloud of unwanted social media following you forever is to ensure that before you dance on the bar or otherwise humiliate yourself, you confiscate all surrounding smart phones. Or just don't do it (but where's the fun in that?).
Unfortunately, what happens in Vegas no longer stays in Vegas, and when you're applying to a co-op, Vegas has a nasty habit of rearing its less-than-flattering head.
For more information on co-ops and home buying, check out the links on the next page.
Most homeowners insurance won't cover your home if you're renting it via sites like Airbnb. HowStuffWorks looks at insurance policies that will.
- Kaye, J. "Matter of Levandusky v One Fifth Ave. Apt. Corp." Court of Appeals of New York. April 5, 1990. (Feb. 6, 2011)http://www.courts.state.ny.us/reporter/archives/levandusky_one.htm
- Levy, Carol E. "Top Dozen Reasons for Co-op Board Rejections." The Cooperator. May 2007. (Feb. 6, 2011) http://cooperator.com/articles/1450/1/Top-Dozen-Reasons-for-Co-op-Board-Rejections/Page1.html
- Romano, Jay. "Last Co-op Hurdle: The Board Interview." The New York Times. Feb. 25, 2007. (Feb. 6, 2011) http://www.nytimes.com/2007/02/25/realestate/25Home.html
- Romano, Jay. "What a Co-op Board Will Want to Know." The New York Times. Feb. 18, 2007. (Feb. 6, 2011) http://www.nytimes.com/2007/02/18/realestate/18home.html
- Romano, Jay. "Your Home; Passing A Co-op Interview." The New York Times. July 30, 1995. (Feb. 7, 2011) http://www.nytimes.com/1995/07/30/realestate/your-home-passing-a-co-op-interview.html?src=pm