Oct
26

Sorry says the Board: The Price isn’t Right

By

Manhattan buyers and sellers have known for years that the real estate market has its share of challenges.  Co-op boards, who can reject applications for many reasons, are now rejecting sales if they think the price is too low in order to protect the property values in the building.

Buyers undergo intense scrutiny during the co-op application process, including providing volumes of financial and personal history, even references for their pets.  Co-op boards can reject an application for almost any reason, and they are not required to state the reason.

Some boards are determined to maintain the value of the building even if it means rejecting serious buyers.  Sellers want to sell their apartments, and buyers are determined to get a good deal or not overpay for the apartment.   Lawyers are fielding phone calls from boards and purchasers seeking legal advice.

For those outside the New York City area, this is astonishing since co-ops are rare.  But in New York City, where co-ops make up about 75% of the housing stock in Manhattan, this is a way of life.  Brokers are becoming accustomed to brokering deals where the contract price would be acceptable to a board, but the seller gives concessions like splitting the flip tax or paying for renovations as part of the contract.

Sometimes the board will reach out to the broker or individuals involved and let them know what the sticking point before flat out rejecting the application.  However, when a board is unwilling to approve based on low price, they run the risk of being considered a difficult board causing people to shy away from the building; or miss the clues that a seller might be in distress and default on the maintenance charges if unable to sell, putting the building in a tough financial situation.

A good broker will be able to negotiate the ins and outs of a board package, explain the pitfalls and advantages, and advise you on what position you should take.  Manhattan real estate is unlike real estate any other place in the world.  Having a broker by your side who knows their market is an asset to your team.

 

Inspired by New York Times article

Comments are closed.