12 Reasons Why Coop Applications Can Get Deny

By: ROS Team

You should already know what steps a potential co op owner can take before embarking on the search for the appropriate co op. Familiarity enables you to concentrate on only the buildings which you must modify so that rejection does not occur.

One must select a broker that knows the criteria and delicate nature of the co-op boards and is capable of developing a board package that would secure a coop membership. One must rely on an experienced broker who understands the delicate nature of purchase applications and the range of unpublicized reasons why rejection letters are issued.

Boards never cite specific reasons for rejecting a buyer, as doing so invites a lawsuit for prejudice. This lists the most typical reasons why co op boards deny purchasers.

1. Financially Ready

Potential buyers need enough assets after closure. Many top buildings need a liquid asset equivalent to two to four times the cost of the purchased flat after closing. Mortgage payments, and even required time frames, vary between building boards. After all closing charges have been paid, that should be the total. A skilled broker will be aware of each building’s needs and remain up to date on variables that change each year when new boards of directors are elected.

Borrowers who have too little income will be denied. For co op boards, the rule of thumb is that coop boards usually expect a buyer to commit 25% of one’s salary to mortgage and maintenance payments. If such payments for one or more homes surpass 25% of one’s gross annual income, one may be rejected.

Read Also: What is a Coop Apartment?

2. Job History

Most co-op boards want to see not just one’s employment earnings but also one’s career history. They want a long-term employer rather than someone who jumps from position to position. Board members turned down career changers who were well-off since they changed employment frequently.

3. Bad Credit

Despite having a solid income and considerable assets, if potential buyers have a poor credit history, including a track record of not paying current maintenance fees or rent, they will likely be passed over for consideration. To ensure the client does not present any red flags, a professional broker would analyze the client’s financial background.

4. Pied A Terre

Amenable boards can have pieds-a-terre. Others act on a case-by-case basis. Others do not allow them. To find a pied-à-Terre, make sure that the broker understands the laws of potential buildings.

Pieds-a-Terre

Even if a building allows it, an apartment owner may disapprove of a part-time tenant who spends too little time in the property. The board might be concerned that the apartment could be utilized as a hotel for friends and family. I’m aware of a couple who tried to buy a pied-à-terre. The board thought it would be too tiny for a family with three teenagers, who would use it for parties when their parents are away. With a skilled broker, the couple would not have wasted time applying to a building that finally rejected them.

5. Guarantor

To get a guarantor, one’s broker should ensure that all prospective buildings are guarantor-friendly. One’s broker must keep abreast of any rule modifications. Even when a building accepts guarantors, you must also include tax reports and verification of income and assets as requirements.

6. Lifestyle

While many co-ops tolerate members with firm public profiles, some refuse any unwanted attention brought to their properties. No one wants those who will upset the peace, quiet, and security of its stockholders. They may, for example, refuse to sell to a rock singer renowned for his extravagant lifestyle and for having parties late into the night.

7. Homework

Most boards will let tenants work in their houses as long as their activities are not dependent on continuous client flow. A writer is okay, but a psychotherapist will likely be refused.

8. Unfulfilled Additional Requirements

Even after obtaining a complete board package from a purchaser, further documents may be required before providing an interview. The board will most likely reject a buyer who cannot or refuses to meet different expectations.

One to three years of maintenance is commonly requested by boards. A board can accept a transaction, but only if the buyer agrees to have upkeep placed in an escrow account. For previous good performance, the escrow account will be discontinued and the monies repaid. If a purchaser refuses the maintenance escrow, they will be denied.

Additional verification of predicted income is required for self-employed buyers, too. Inability to present documents may result in non-disclosure of assets. A board may reject an applicant.

9. Lower Purchase Prices

An effort to sell a coop apartment at a below-market price is viewed unfavorably by the board since such transactions harm the value of all of the units in the building. I have witnessed a desperate seller accept an offer on his flat for 20% below market value. Of course, the board rejected the request due to a lower price per share impacting all the shareholders’ equity.

10. Pets

Many of the previous cases also required a buyer’s broker to undertake due diligence to identify which buildings were pet-friendly. A broker should inquire about the kind and quantity of permitted dogs, even if a building admits dogs.

Pets

Examples include buildings that allow two dogs per apartment but won’t allow Pit Bulls, Mastiffs, and Rottweillers. Others won’t allow canines that weigh greater than 50 pounds.

11. Noise

When a buyer intends to make noise that will disturb other shareholders, the board might deny the acquisition. Actors, percussionists, singers, and dancers can all produce noise that will influence a board to reject their application. Apart from that, if the flats are soundproofed, they can refuse to collect the deposit.

12. Poor Interview

A competent broker will prepare a buyer for the inevitable board interview. In addition, the buyer should arrive on time for the discussion and dress appropriately and without posing any potentially arousing inquiries.

Poor Interview

When in doubt, never volunteer information. Instead, one should be polite and concise in answering all queries. The less said, the better. Once a buyer has closed on an apartment and moved in, they may make as many suggestions or ask as many board questions as desired. Being an owner, that shareholder has become an elite “club member” who can vote and have a voice.

Conclusion:

Buying into a coop is much more like joining a club than it is like buying real estate. The stock price of the club changes in reaction to your occupancy, not the wall and door ownership of your flat. When you live in this building, will you help foster the club atmosphere and contribute to the community’s overall well-being, or will you rip out the same hull of the ship, killing everyone in the building? The coop board has to make the decision.

Make an offer to one group of potential tenants and wait for their response before alerting the rest of the applicants that the property is no longer available. This is simply to safeguard you should your first tenants refuse the property. This is why you must finish this step swiftly. If you hold out, tenants will become less available.