Welcome to Part 7 of my ongoing blog series, “Purchasing an Apartment in New York City”. In Part 6 of the series – “The Bank” – I focused on the role your lending institution plays in the purchase process, assuming you are financing a portion of purchase. In Part 7, I will attempt to mentally prepare you for the several weeks of nearly complete loss of control and communication while we wait for the waiver of first refusal (condo) or the request for a board interview (co-op).
The good news? A lot of our hard work and heavy lifting is done at this point (see Parts 1-6). The bad news? Now that the package has been delivered, we are at the mercy of the management company and the board.
Before defining this abyss, I want to reiterate the importance of ensuring the board package is 100% complete and accurate upon submission so that a) it will be easily understandable to the Board of Directors and the Transfer Agent, so as to not raise additional questions or red flags and b) it (board package) will not be returned to you after sitting on a desk for two weeks just because you failed to included the blank page of a bank statement (true story), which might restart the clock on your waiting period. It is also very important to note that this is NOT just a co-op issue. In fact, precisely because exercising the right of first refusal (condo purchasing the unit themselves, thereby blocking the sale) is the only way to block a purchase in a condo transaction – some condo boards will use their ability to delay or slow down a purchase by scrutinizing the contents of the board package if they don’t like the price or the purchaser.
Assuming the package is well organized, 100% complete and accurate, the Transfer Agent (whether it is a condo or a co-op) typically reserves the right to take up to 30 days before he or she is expected to create a summary of the board package and deliver it to the building’s Board of Directors. Now, that doesn’t necessarily mean the Transfer Agent/management piece of the process will take the full 30 days, but you should plan for around 4 to 6 weeks before the board has a chance to review the package and issue the waiver of their right of first refusal (condo) or calls for an interview (co-op).
There are several factors which might speed up or slow down the process – most of which you cannot control. For example, if the board members only review packages at their monthly meeting, your package may sit for a few weeks before the board has a chance to take look. In another building, the board may review packages “ad hoc” and therefore the review period may be shorter. The level of technical sophistication of the management company and/or board will also be a factor. If the management company or building have a web portal or intranet on which they can upload board packages electronically – making them accessible to the board members much more quickly – the turn around time could be reduced significantly. If they don’t, they will likely rely on the building Manager, FedEx or a messenger service to make sure the original and all 8 copies of your package are delivered to the right hands. Unfortunately, real estate in NYC is still a game of paper, hard copies, colored Sharpies, bike messengers and fax machines. So it goes.
If time is of the essence, you may want to check with the Transfer Agent to see if they offer the opportunity to “expedite” the package for a fee (typically a few hundred dollars). Expediting the package moves your package to the “top of the pile” and will shorten the management review from a few weeks to a few days. This is not always an option but it is worth asking if you are concerned about timing.
The Waiver: If you are purchasing a condo, congratulations! Receiving the “waiver” is your board approval, and what the bank needs to clear the file to close. The attorneys and bank (if applicable) will spring into action to schedule a closing date – typically in the next ten days to fourteen days depending on the availability of all parties, closing disclosure requirements (TRID), etc. However, if you are like 75% of purchasers in New York City you are purchasing a co-op and, therefore, still a couple steps short of the happy dance.
The Interview: In a co-op purchase, the board reserves – and almost always exercises – the right to interview a prospective shareholder before giving official approval. Typically, if an interview is granted, it means that the board has all of the information they need and is satisfied with the information provided in the board package (financials, work history, character, etc.). The interview is their opportunity to meet you face-to-face, confirm their decision, share the house rules and perhaps even welcome you to the building. In most cases, if there is a financial concern such as DTI or post-closing reserves, the management company will reach out the the buyer or their agent for more documentation, a request for additional conditions (such as holding money in escrow) or simply deny the package without granting the interview.
That said, don’t let the prospects of additional questions or a board turndown worry you. As I mentioned in earlier posts, if your real estate professional has asked the right questions and gathered the proper information regarding the building’s requirements, the likelihood of any of those situations arising will be reduced significantly. Nevertheless, it is important to approach the interview with seriousness and proper preparation, just in case the board is on the fence for one reason or another. Your real estate professional should offer to sit down with you and “prep” you for your interview including what to expect, what to say (or, more importantly, what NOT to say), who will be in attendance, what to wear, etc.
For more on the Board Interview, stay tuned for Part 8 of “Purchasing an Apartment in New York City.”
My name is Eirik Davey-Gislason and I work in real estate in New York City. This blog is an opportunity for me to educate everyone who has a horror story or is on the verge of one. By sharing, preparing and advising my audience on what to expect, what is normal, what is right, and what is wrong, I hope to do my part to expose the wrong-doers and shape the future of this dysfunctional thing we call NYC Real Estate.