The process of buying a co-op apartment is certainly unique, but with proper guidance and preparation it doesn't have to be miserable. The key to a less stressful experience is simply making sure you understand what the process entails and deciding whether it is the right investment choice for you.
If you are not familiar with the process of buying a co-op, it can be helpful to hire a professional broker to guide you. Do your research and select someone who has experience representing buyers in comparable co-op sales transactions. Because the process involves an extensive co-op board package and board approval process, having someone on your side can help ensure you are informed and prepared.
Figure out whether or not you can afford to buy a co-op. Most co-ops have very strict financing requirements. Today, buyers interested in financing for an average-sized co-op will likely be required to put down a minimum of 20-25 percent. In addition, they will be required to have a certain amount of liquid assets after closing. Depending on the co-op and location, this can range from three months maintenance payments to twice the value of the apartment. Along with an excellent credit score, the board will likely want to see a certain debt-to-income ratio. Understanding the financial requirements of co-ops in your area will help determine what you can afford.
If you are approved to purchase an apartment in a particular co-op, you will have to abide by that co-op's house rules, so get a copy of these in advance so you'll know what awaits. For example, many co-ops will not allow you to sublet your apartment. If your intention is to buy the apartment as an investment property and rent it out, this isn't going to work for you. Some co-ops don't allow pets or have specific rules pertaining to the use of the building's amenities. It is important to understand these rules ahead of time. Though amendable, they will help you get a feel for the type of community you'd be joining.
Co-op boards require all applicants to complete a board package. This application may request any number of items, ranging from personal and business references to tax returns and an extensive financial statement. Complete everything in its entirety. You will likely have to provide backing documentation for every item listed on your financial statement. Though this part of the process can be frustrating and seem intrusive, there is no way around it. If you want to live in that particular co-op, you must comply.
Once the board has reviewed your application, they will decide whether or not to bring you in for a board interview. When it comes to the interview, it's best to dress and act in a conservative manner. Answer their questions in as few words as possible. In essence, be boring. A board can and will reject you for any lawful reason and they have no obligation to explain themselves. If you want in, it is best to be accommodating and keep your opinions and emotions at bay.
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