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The ABCs of Buying a Co-Op Apartment (So You’re a Total Masochist??)


Buying a co-op apartment is a long, byzantine process. But if you're ready to sign that agreement, here's the roadmap to this layer of hell.

Co-op apartments in NYC

You’ve been up all night thinking about how you’re so tired of throwing this ungodly amount of money down the toilet in rent every month when you could own something. So you hop on Zillow, Trulia, or NYC-specific StreetEasy and salivate over all those gorgeous apartments for sale. You make a note of several that appeal to you, get a mortgage pre-approval and bank statement together, then you email a broker and tell them your budget range. You make a list of buildings and neighborhoods you’re excitedly wondering will reveal your dream home like a prize behind a door on an old school game show.

But you’re not just any old homebuyer looking to carve out your own little wormhole in the big, rotten apple. You love pain. To the point that Machiavelli would throw shade if he had a Twitter account today.

You want to get in front of a bunch of people who will get more anal than a proctology practice on your personal life and finances. You want to perplex all of your friends and family who own detached single family homes in faraway places like Branson and Philadelphia who start to wonder why it’s been several months since you went under contract and yet you’re still cutting rent checks like shoveling coal into the furnace on the Titanic. Even E.L. James gasps at how far you’ve gone with this and the S&M community as a whole messages you late at night, begging you to learn how safewords work and to stop doing this to yourself.

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HIGHLY recommended attire for that board interview!

YOU’RE BUYING A CO-OP. BE AFRAID.

Well, last time I got into why buying a co-op sucks the big one. It’s something you should only do if you really truly think you’re never going to leave this city, and have worked the same job forever (a growing rarity for most people in my age bracket). So if you’re planning on starting that dream business or going freelance, don’t say a peep about it on your interview, should you make it to that stage. Because co-op boards hate the self-employed more than they hate single women who aren’t millionaires trying to buy into one.

But as we all know, shit happens: your parent in Nevada needs a caregiver. You get offered your dream job in Toronto or the startup opportunity of a lifetime in San Diego, or you finally meet the love of your life while rambling on Discord and you two decide that your future is in Tokyo. So, you might want to look beyond jobs and neighborhoods and think about your life and family right now, and what you can reasonably expect the near future to look like.

I already explained that these arrangements involve fighting like hell to get in, and get out. And sure enough, I’m going to get some StreetEasy and Bricked readers bashing me in the comments saying I’m probably a bad neighbor, when excuse me, my toad and I have always been quiet and well-behaved. And let me tell you, giving up after the third attempt to get a co-op and opting for a condo was the BEST thing I ever did. Call it wimping out, I don’t care. I can rent my place out penalty-free or have a very simple transaction if I decide to sell. But I did get some pretty good stories to tell from the 2.5 years of my life and $7,000 I’m never ever getting back, and had no idea it wound up setting the stage for my future side hustle in writing about homes and real estate transactions!

So if you’re ready to assume that risk that comes with the co-op route, and love being whipped til you’re red and sore with paperwork?

The safeword is “SCREW IT, I WANT A CONDO”. Let’s do this.

Steps of a Co-Op Purchase Transaction

Happy couple buying co-op apartment in NYC

As you might have already surmised, buying a co-op is a unique form of hell.

It’s not just because New York is a notoriously tight market, surpassed only by San Francisco and possibly Boston. But you can get that mortgage pre-approval and it won’t change a thing. Hell, a HUGE PILE OF CASH can end up making no difference! When you’re buying a condo or single family home, they will expedite the process. Not necessarily with a co-op.

But like any other home purchase, you start with the offer. If the seller is getting lots of offers, you might have to outbid them or back out. While waiting to see if your offer gets accepted, you should review the co-op documents before going under contract. This is things like the board’s financials, assessment history, and anything else you can find out about the property. In most cases, you’ll have to most fast before another offer swoops in.

Then it’s time to assemble your board package which can be an incredibly drawn-out process. We’re talking worse than a tax audit, and I say this as someone who once did tax returns for millionaires.

And let me tell you: no audit I presided over EVER involved the IRS asking my client about the temperament of their pet or finding dirt on them on social media.

Your board package typically consists of the following:

  • Co-op application
  • Financial statements (assets and debts)
  • Tax returns
  • Employment verification
  • Window guard and lead paint notices (NY state law)
  • Letters of reference

If you’re self-employed, the board ultimately goes by your tax returns but might request additional financial documents. Generally, you get one letter each from a professional reference like a manager then a personal reference like a friend, community or religious leader, or other way of showing off who you know. Bricked and StreetEasy have some nifty co-op letter templates you can adapt, and we all know that applicants have been writing them since the beginning of time then get the reference to sign and seal it. It’s just another stupid formality for pure annoyance.

Once your board package is in, you wait some undisclosed amount of time until the next board meeting. Every co-op is different and some meet monthly, others only quarterly. This can suck if your application got in JUST after they had the last meeting. Your application can get rejected right away, or they can call you in for an interview. More waiting then you find out if the co-op will let you in or not. With relief, you take that acceptance letter and go to your closing with cash in hand and/or the underwriter’s approval then get the keys.

If the board rejects you, it doesn’t constitute breach of contract because the sale becomes void. Co-ops can turn you down for any dumb reason they want, even an illegal one, but just claim it’s financial, or they were afraid your toad would pee on the hardwood floors after she got angry at them at the interview and let that geyser go. You’ll lose your legal fees and any non-refundable application fees, but the seller can’t sue you. However, the seller can if you decide to back out after the board says yes. You can also sue the seller for lost legal and application fees if they decide to withdraw their sale offer before the board has a chance to review your application.

Real estate transactions are not simple or short to begin with, but relatively speaking, a co-op purchase is definitely among the longest of all your options. I saw board package assembly alone reduce investment bankers with seven-figure incomes to tears.

Anatomy of Co-Op Organizations

Co-op board discussing new applicant

Co-ops aren’t just the building owners themselves, as you will own shares in a corporation and not in fee-simple like a house or condo. There’s the actual owners’ corporation, the managing agent, and the board.

Managing agents are companies that are responsible for the day-to-day management of the property. The actual building maintenance along with things like regulatory compliance, controlling costs in the long term like building overhauls and insurance, collecting common charge or maintenance payments, and handling resident complaints. Landlords might play fast and loose with tenants, but as a co-op owner, you can sue a managing agent or co-op board pantsless over violating bylaws or local building codes.

The board makes decisions concerning appointing a managing agent, approving or denying new owners, and other aspects of day-to-day life. Boards are largely comprised of that property’s residents and they draft the house rules and by-laws that every resident must abide by. Depending on the size of the co-op, a board member may also be responsible for managing the building’s finances.

The following set of board documents should be on the co-op’s website or obtained by your broker prior to making an offer:

  • Assessment history and current assessments
  • Financial statements
  • Owners’ corporation by-laws
  • House rules
  • Capital plan

You need to review these documents because they will inform you what kind of ride you’ll be in for. If the roof hasn’t been replaced in 20 years, suddenly you could be footing the bill for a new one and you’ll really feel the pinch if it’s a small building with fewer owners to cover that cost. A financially insolvent co-op can also be indicative of poor management, or a rough patch like residents dying or taking hits to their incomes which cause common charges to fall into arrears. Even if your personal finances are otherwise perfect, a bank will not sign off on a mortgage for a property that has bad financials at the co-op level.

I went through this myself with a small building co-op where I made a cash offer because no one would lend for this particular property. I wound up dodging a bullet because the managing agent had miles of lawsuits which I didn’t discover until too late in the process, which also tends to turn lenders off.

How to Get Dirt on a Co-Op When They’re Hidden Behind Countless Shell Companies

Co-op applicant received approval document

Maybe it’s just from playing so many adventure games and reading every single Sue Grafton book growing up, but my investigative skills paid off bigtime when I was sniffing out co-ops on a regular basis before making offers after I learned my hard lesson with the small co-op where a cash deal was required. To save you my years of detective work?

The StreetEasy forums and NYC Department of Buildings will become your BFFs. The NYC Public Advocate’s Worst Landlord List is also bae because trust, there is a LOT of crossover between them and the shady shell companies that let all these properties totally rot. CityData forums are also incredibly helpful when you want to find out about the worst management companies as people often won’t hesitate to name and shame the ones that already have reams of lawsuits against them. But if they’re REALLY terrible, you might find a New York Times feature or three like I did on this one place!

Shell companies make it easy for landlords and managing agents to hide their graft. An LLC can own another LLC or interest in one, like LLC Inception. Like how this is pan pizza INSIDE ANOTHER PIZZA.

Pan pizza

If a company has been misappropriating funds or neglecting buildings, there’s always more just like roaches. Many of New York’s oldest slumlord dynasties will also have horses in the co-op management game. They all got at least 50 shell companies where a family member, or one of their children or spouses, owns them alone or with one of the other shell companies like a graft-soaked Connect-4. Start with one managing agent’s name, then scouring these forums and NYDOB is crucial.

Because they lack skin in the game for residents’ quality of life, they make their own contracting outfits win the bids and if one of their own sits on the board, they can make that service provider the only approved one so your waiting and suffering stuffs their wallets.

But hey, you’ll “own” a piece of the toughest city in the world to get into at the end.

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