Co-ops are different from single-family homes and condominiums. When you purchase a co-op, you are not purchasing real property. You are buying shares of the company that manages the building. Instead of a deed, you receive a proprietary lease that gives you the right to occupy a specific unit in the building.
If you want to buy a co-op, you should first get an idea of how much you are willing to spend on your new home before you start looking. It’s advantageous to get pre-approved for a mortgage because that lets sellers know that your loan application has a good chance at approval. You should also hire a real estate agent who can help you find a co-op that fits your goals.
Buying a co-op may require a large down payment, often in the range of 20% to 30%, and a low debt-to-income ratio. A co-op may also require you to have cash reserves sufficient to cover two years of expenses in case you lose your income.
Once you’ve made an offer and the seller accepts it, your next step is hire a real estate attorney to review and negotiate the contract. The attorney will also conduct due diligence on the unit and building where you are purchasing.
Due diligence includes review of building documents, which generally include the offering plan with amendments, the last two years of building financials, house rules, by-laws, pet policies, sublet policies, etc. Your attorney will also usually review board minutes going back three years.
Once due diligence is complete and the contract is fully negotiated, you will sign the contract first and provide a down payment, and then the seller signs. Once the contract is signed by the buyer and seller and the escrow agent has received the deposit, the contract is legally binding.
Once the contract is signed, you submit an application to the co-op board. The co-op board may require you to attend a board interview in which the board might ask you questions about your sources of income and goals to determine whether you’re a good fit for the co-op. If things go well at the interview, you and the seller set a closing date. After closing, you can move into your new home.
If you are buying a co-op, James H. Cook, Esq. can help you with:
• Conducting due diligence on the building
• Reviewing the real estate contract
• Drafting the co-op purchase rider (supplement to the contract)
• Negotiating the terms of the contract
• Explaining the terms of the contract
• Ordering a lien search
• Resolving any issues that occur prior to closing
• Corresponding with the seller’s attorney, co-op transfer agent, the mortgage company, and the mortgage lender’s attorney
• Representing you at the closing
If you are selling a co-op, James H. Cook, Esq. can help you with:
• Drafting and negotiating the contract
• Reviewing and negotiating any additional riders to the contract prepared by purchaser’s attorney
• Explaining the terms of the contract to the seller
• Reviewing a lien search
• Ordering the original stock certificate and proprietary lease
• Resolving any issues before closing
• Preparing for closing
• Representing you at closing
A skilled real estate attorney can help guide you through the co-op purchase or sale process and protect your interests. Call James H. Cook, Esq., at (646) 844-0425 for a free consultation.
James H. Cook, Attorney at Law 