Couple granted an interview after reading this post.

All co-op apartment buildings require prospective tenants/owners to apply for membership by submitting a co-op package. This usually consists of an application, not unlike a job application (only more intrusive), along with some supporting documentation (e.g. tax returns, bank statements, pay stubs, reference letters, etc.).  The co-op’s officers – commonly referred to as the co-op board – review your application and, if they like what they see, will later schedule an interview with you.  After which, you will be approved (and can go forward with your purchase), or rejected with scant rights to protest or appeal. The process is a minor inconvenience for some, while others need their own copy of DSM-IV to describe its effect on them.

The first step to passing the interview is being granted an interview. Submitting a perfectly constructed co-op board package will substantially increase your odds of being asked on that date, and will go a long way to reducing your anxiety throughout the review process.

1. Get Help. A good real estate broker will work his or her tail off to make your application sparkle and to streamline the entire process. However, if you are flying solo, enlist the help of friends or colleagues who have been through the process.  Ask them lots of questions and, if they really love you, ask them to review your application package.

2. Get it in writing. Some boards are formal and will provide you with a printed application containing very specific instructions and required documents; others will send you an email with instructions; and there are those, “unstructured” boards, that will leave you a brief voice mail describing a list of documents it would be nice to get from you. This last situation is untenable. Instructions from the board should be unambiguous, complete, and in writing. If yours are lacking, send an e-mail or letter to your board contact or the managing agent (see #3 below), “confirming” your understanding of what is being asked of you.

3. You will have questions. During the application process you want to communicate consistently with the same source. Doing otherwise can lead to misunderstandings, an incomplete application, and time lost. If you are working with a good broker or a managing agent, that’s great. They can answer all of your questions. If you are on your own, I recommend getting the email address of the primary board contact (and one or two other board members in case this person goes on a holiday).

4.  Give them what they want, not just what (you think) they need. If you have followed step 2, you have a formal application or clear-cut instructions from the board or management company. These need to be followed to a T. Here are a few examples of mistakes applicants make along the way:

• You are a couple purchasing your first apartment together. The board application asks for two personal reference letters from each applicant. In this situation I’m often asked if it’s okay to share one or both of the personal reference letters. This seems reasonable, because couples usually have friends in common, but the answer is no. If the board asks for “two personal reference letters from each applicant,” then give them what they want. Of course, your friends can wax poetic about both of you in their letters, provided each of you has two separate references.
• Similarly, I’m often asked if applicants need to supply as many tax returns (or bank statements) as specified in the co-op application. The answer is yes. I once worked with a board that asked for the last five years of federal tax returns, and I agree, the request was excessive.  But if you want to own the apartment you need to give the board what they want – all five years. (If you are a couple who files separately, then that would mean including ten tax returns with your application).
• Employer references and professional references are two separate items.  If asked to supply one of each, then you cannot use one letter to satisfy both criteria. You need to supply a letter from your current employer (or HR department) specifying your current employment status and another from a colleague or former colleague, who can attest to what a wonderful worker you are.
• Filed under the topic heading, This Should be Obvious, here are a few more things to do:

Supply as many copies of the application as is requested.
Don’t negotiate the application fee, the move-in fee, or the move-in deposit.
Sign and date wherever requested.Complete the entire application.
Don’t enter any misleading or inaccurate information.

5. Submit well written reference letters. If you have friends or colleagues who write well, and who like to write, then ask these people to write your reference letters.  Not everyone is so fortunate. You may need to give your references an outline (or flat out write the letter for them). If possible, collect sample reference letters from other people who have passed a co-op interview. You can pilfer ideas and format from these letters.  In any case all good reference letters will state the following:

How long: How long the reference has known you, or how long the reference has worked with you, or how long the reference has been your landlord, etc.
Relationship: Who is the person writing the letter? Are they your manager, a colleague, a friend, landlord, etc.?
Relevancy: employee references should state that you are good at your work and why, landlord references should state that you have always paid your rent on time and are very considerate, personal references should explain why you are a good and conscientious individual.
Your reference letters should explain why you’ll make a good neighbor and a good addition to the co-op.  On that note, give your references a heads up that they may receive a call from the co-op board. Employee references and landlord references tend to be contacted more frequently than personal references, but all should be put on notice

6. Be Honest and Forthright. Your references don’t need to reveal every time you forgot to do the dishes or the pens you swipe from the office, but your entire application package should be an accurate reflection of you.  So don’t fudge your finances or claim you invented the Internet in your co-op application.

7. Triple check your numbers. This one is very tedious, which is why it trips up so many people. Mistakes here could force the board to ask for clarification or give the impression that you have something to hide. This could delay your interview (and move in date), or worse, you may find yourself rejected by the board. Here are few things to look out for:

• There will be a place on the application where you state your annual income.  This needs to match the amount on your employee letter.
• If you are asked to provide a detailed list of assets, these need to match exactly any financial statements you are including with the application.
• The financial documentation (bank statements, tax returns, etc.) you include with the package, should be up to date.  More specifically, monthly statements should not be more than 30 days old, and quarterly statements should not be more than 90 days old.

8. Type up the application. The board application is almost always an electronic document, making it easy to complete on your computer, your tablet, or in the cloud.  If you are handed a paper application, I recommend at least asking for a digital version.  If none is available, then scan the hard copy to a PDF file and complete the application using adobe acrobat or a less expensive PDF editor (or just retype the whole damn thing in word).

9. Neatness counts. Whether typed or (if all else fails) hand-written, the application should be clear. Any additional documentation should be delivered in the same order it was asked for and each section of the package should be preceded by a title page (for extra credit, print title pages on colored paper or use tabs). I don’t recommend binders or folders mostly because, at 200 pages and above, most board packages are too big for such fasteners (but also because some board members resent the waste). Put a rubber band or industrial-sized binder clip around each copy of the package and stack them neatly on top of each other.

10. Hand it in on time. Applicants are usually required to submit a complete application within a specified period – most commonly, the earlier of 10 business days of signing a contract or 5 business days after receiving a bank commitment letter. This is a requirement you’ll agree to in your contract of sale, so best to comply completely. If at all possible, I recommend collecting documents and reference letters well in advance of offering to purchase an apartment (see Pre-qualify Yourself).

A lot of this may come across as draconian. The best boards use their considerable power to act responsibly and in the best interest of the co-op they represent.  The worst operate as a fiefdom where questionable decisions are made sometimes serving the interest of individual board members and not the co-op as a whole.  Thankfully, this latter scenario is the exception and not the rule, and human nature being what it is, most boards fall somewhere in the middle. Bottom line is that while putting in the effort to compile a solid application is no guarantee to acceptance, why give a board reason to reject you on whimsy?

When you have a moment, please share your co-op experiences and tips via e-mail or the comments section to this post. Next week, we’ll talk about the co-op interview and how to pass it and before the end of the year we’ll make available a comprehensive e-book with more detailed information and lots of examples.  Thanks for reading.

(The following article was suggested to me by one of my favorite PHDs.)  

As if tax season weren’t stressful enough, prospective home buyers have two more looming deadlines to contend with.  Both are related to the federal government’s homebuyer tax credit. In a nutshell, the federal government is paying consumers (up to $8000) to purchase a home. You need to get on your horse though. Purchase agreements (i.e. being in contract) need to be signed by April 30, 2010, and you need to purchase your home (i.e. close) by June 30,2010. 

One word of caution. If you intend on taking advantage of the credit, don’t wait until April 1st to start shopping. There is liable to be a feeding frenzy at that time which could artificially push prices higher, and nullify the value of the credit.

 Here are the facts:

What Qualifies?

The Tax Credit applies only to the purchase of a primary residence (i.e. home) where the purchase price is $800,000 or less. The home cannot be purchased from a direct relative (i.e. parents, grandparents, siblings, or children).

 Who Qualifies?

First-time Homebuyers

 First-time homebuyers are defined as people who have not lived in a home they own for the previous three years. For first-time homebuyers, the tax credit applies to 10% of the purchase price up to a maximum amount of $8000. 

Repeat Homebuyers

Repeat homebuyers must have owned their current home for at least five years or have lived in the same home for five consecutive years over the last eight. For repeat homebuyers, the tax credit applies to 10% of the purchase price up to a maximum amount of $6500. Notably, the new law does not require that you sell your current residence.

Income Requirements

Single taxpayers with annual earnings of $125,000 or joint filers with annual incomes of $225,000.  (Single homebuyers with incomes between $125,000 and $145,000 and married homebuyers with incomes between $225,000 and $245,000 will be eligible for a reduced credit).

When?

You must have a signed contract by April 30, 2010 and your transaction must close by June 30, 2010. This deadline is extended to April 30, 2011 for members of the military who have served outside the United States for at least 90 days between Jan 1, 2009 to May 1, 2010. 

How?

Taxpayers can claim the credit on their federal income tax returns. If the credit exceeds the amount of tax owed, the difference is paid in cash – even if the taxpayer owes no tax!

Thanks for reading. 

For additional information (of both the detailed and confusing kind) have a look at the IRS websites below:

First-Time Homebuyer Credit

Some Current Homeowners Now Also Qualify 

Form 5405

Form 5405 Instructions

…

I have a question.

If everything I’m reading these days sounds something like housing hasn’t hit bottom.., or something like housing prices are plummeting.., or Deutsche Bank Predicts 40% Drop in New York Home Prices.., or Brooklyn leads the way in unfinished condos.., or the Real Estate crisis is finally catching up to New York..,  then why are so many “experts” out there still referring to this old fairy-tale?

By far the most effective strategy for moving a sale from accepted offer to contract is to be prepared – a.k.a do your homework, a.k.a have all your ducks in a row – or as we are calling it here: pre-qualify yourself.

What does it take? Being pre-qualified means that you have an understanding of your financial affairs, your papers are organized in such a way that you could sign a contract within a week (if you had to), and you have identified your real estate team. Specifically,

• and most importantly, hire a lawyer. If you are a buyer you need to do this before you begin shopping for a home. If you are the seller you need to do this before you put your property on the market. For more on this see What Happens Now?
• You have made, or accepted, the offer in writing. This is not a binding contract; this is just the offer, in writing, to cut down on the ambiguity. Why in writing? Here are some things that I have actually heard people say – “that’s not what I offered;” “I only said 10% down;” and “no, I meant $559K, not $595K.” If you are the seller, you should have a pre-printed Offer to Purchase Form ready to be filled out. If you are the buyer, you should have your own Offer to Purchase Form, in case the seller doesn’t have one. At a minimum you should fax or e-mail the other party the following information: your contact information; the offer amount; the amount of down payment; where the down payment is coming from? (i.e. is it coming from the buyers’ savings or are they borrowing it); and any contingencies (i.e. the buyers need to sell their own property/home in order to purchase the one at issue).
• If you are a buyer, you have obtained a pre-qualify letter from a bank or mortgage broker. If you are the seller, you will ask the buyer for this – if he or she doesn’t have it, then the sale is a no go (unless of course the buyer is paying all cash, in which case you just won the lottery!). Besides having a letter to present to the seller, this process will inform you about how much of a house you can afford.
• If, you wish to inspect the property before going into contract then you have hired an engineer. This means that you have spoken to them and they are aware that you may be scheduling an appointment soon.
• You have sat down and gone over your finances – for example, if you plan on liquidating assets to put toward the down payment, you know what is involved and how long the lead time is.
• You have located the documents you will need to give the mortgage lender, such as pay stubs and bank statements.

There is a lot more that can be said on this topic, so feel free to leave your own tips/suggestions as a comment at the bottom of this post. Thanks for reading, Jim.