There are a number of Do’s and Don’ts when it comes to the co-op interview, but there are three (3) that you absolutely have to commit to memory and I’ve trademarked a new acronym to help you remember them:  NRA (oddly, RNA and NAR were both taken).

Never Ask Questions

Review your application

Arrive on Time

1. Never Ask Questions. This is the suggestion I get the most pushback about, but ignore it at your own peril.  I may be paraphrasing a bit here, but this is how some of my clients have responded: “What do you mean, Jim? We have a lot of questions for the board. We want to know when the co-op is going to replace the building’s windows. When will the exercise room be completed? When is the maintenance going up? Are there any assessments? When will we be able to start our gut renovation?”

No, no, no.

The purpose of this meeting is to decide whether you are going to become a member of this co-op, a neighbor of the people sitting in the room with you. They ask the questions. You answer them. Coffee is for closers, diamonds are forever, politicians are for sale, and questions are for shareholders. You may ask questions once you are a shareholder. Let me also say, that the co-op interview is not the time to be deciding if you want to purchase the apartment. That ship sailed at the end of the due diligence phase. If you have questions because you think you may have been misled, because you didn’t look over all the meeting minutes, because you didn’t read your contract before signing it, or haven’t reviewed the co-op’s financial statements, then have a conversation with your attorney.  If you have general questions about the co-op or your apartment, you should ask them before you sign a contract or direct those questions to a third party – the managing agent, your lawyer, or your broker.

Remember, you are being evaluated, so when you ask questions (even ones you think are insightful and show how thoughtful you are), you run the risk of raising a red flag (Troublemaker! Usurper! One-Who-Doesn’t-Follow-Directions!), even if that is not what you meant to do.  So answer their questions accurately, politely, and don’t ask any yourself.

2. Review Your Application. You should be familiar with your application, so at the very least read it again before your interview. You will be expected to answer questions about it quickly and accurately.  Also, bring a copy with you.

Another reason to review your application is for accuracy. Always be honest and accurate with your answers. Don’t try to impress anyone and never exaggerate. You have been asked in for an interview. This is great. It indicates that on paper, you are liked.  Relax and answer everything honestly.

Lastly, couples should decide who is fielding which questions. For example, one partner may be assigned to answer financial questions, while the other fields the rest.  Avoid discussing answers with your partner during the board interview and be sure that whoever is charged with answering questions about information in the application has reviewed the application.

3. Arrive on Time. Enough said.

Here are a few more helpful tips.

• Just the Facts, Please. Don’t volunteer additional information about yourself and don’t show off.  Specifically, it’s best not to identify Twisted Sister as your favorite band, you don’t play half-court ball in the kitchen, you are not suing your last co-op (assuming you’re not), you have no plans to host a casino night once a week, and if you see any Yankee hats in the room, you are not to bring up the Mets.

• Privacy. Be prepared to answer personal questions without being angered or upset, or at the very least, without indicating that you are angered or upset. The board has a lot of leeway as to what type of questions they can ask you. Answer their questions honestly and do not avoid answers to personal queries. Note, however, that boards are prevented by law from asking questions of a discriminating nature. But questions concerning money, assets, income, smoking, drug use, job history, landlord history, criminal history, etc. are fair game.

• Dress Well. Treat the interview as you would a job interview and dress appropriately.

• Pets and Kids. There is a good chance that the board will want to meet them, so (try to) make them behave if they are interviewed as well.

• Leave it at the Door. Whatever it is, a bad day at work, a fender bender, the Mets losing another game, put it behind you, put your smiley face on, and enter the room like life couldn’t be any dreamier. If something truly traumatic has taken place in your life, and this is not possible, then reschedule the interview.  One more point: if you have just had a fight with your spouse, do not continue it during the interview. I mention it because this happens. Kiss, make up, and tell each other you were wrong – you have the rest of your life to fight in your new apartment.

• Be Confident. And relax! Remember, being granted the interview is a good thing.  They wouldn’t have asked you in if they didn’t think you were a good fit for the co-op.

Please share your own co-op interview experiences and tips in the comments section and keep an eye out for an e-book with comprehensive information coming soon.  Thanks for reading.

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.

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?

Fig 1-5, An unidentified broker documents his time at a recent open house.

Pssssst. Hey you. Yeah you: Mr. Buyer. Want to know a secret? Come over here. A little closer. Closer. Clooooser. Now listen carefully. We are not very busy. No- scratch that, we are not busy at all…OK, it’s dead out here. August is always dead. Really dead. Our open houses are poorly attended. Our blackberries aren’t buzzing. Our sales figures are down. Our sellers are not happy, so we are not happy. Our sellers are worried. We are worried. Our sellers want to make a deal. We want to make a deal.

Are you still listening? This is an opportunity for you. Here’s a suggestion: this year, why don’t you and your brethren close up the beach house early and, instead go shopping for a real estate bargain?

Here’s another secret: about two weeks after Labor Day, everything changes. Things pick-up, office phones ring, websites get hits. More of you go to our open houses. More of you make offers. And more of you actually purchase a home. How do I know? Just like August is always slow, September is always better.

So make a deal while you can – the Brooklyn Real Estate Sale ends September 14th!

1. Pick an attorney.  It’s pretty tough, in New York, to complete a real estate transaction without an attorney. It is also pretty tough to get on their calendar. So, I highly recommend that you do this before you put your home on the market or before you start shopping for a new one. A good lawyer is your advocate throughout the transaction and if you are a buyer, often the only person who has your best interests in mind.  I personally would not buy or sell real estate without one and you shouldn’t either. Rules for picking a lawyer are the same as they are for picking any professional: get a recommendation if you can and pick someone you trust and feel comfortable with. 
2. Start the attorneys communicating.  The person on the other side of this transaction will have an attorney as well (if they don’t, good luck getting into contract). You’ll want to insure that both attorney’s have each others contact information. What good agents and brokers usually do is give each attorney a one page Deal Sheet. The Deal Sheet contains the contact information for the buyer, the seller, their attorneys, the sales price and the escrow down payment (this is usually 10% of the purchase price and is different from your down payment for financing). If you are not working with a broker, then just put you’re your own deal sheet together.  You should send the deal sheet to each lawyer within a day of the accepted offer. A well organized Deal Sheet will save a busy lawyer time and get you to contract sooner rather than later.
3. Seller’s attorney will send out a contract to the buyer’s attorney. The attorneys will probably negotiate a bit on some of the details, but they usually come up with a document that they will let their clients sign. You really want to make this happen within two weeks  -before the person on the other side of this transaction changes their mind.
4. Sign the contract. You will meet with your attorney who will advise you about the specifics of the contract.  You should ask any questions you have here and if all goes well you’ll sign the contract. If you are the buyer you will also write out a check -usually 10% of the purchase price- which will be deposited in an escrow account. 
5. Choose a mortgage broker or bank (buyers only).  Like picking an attorney, this is something I recommend you do before you even start shopping for a place. Most lending institutions will issue you a pre-qualify letter which will state that you are capable of borrowing up to X amount of dollars. This is a good way to prove to a seller or broker that you and your offer should be taken seriously.
6. Appraise the Property.  When you boil it all down, banks only judge a transaction by two criteria.  Will the buyer pay back the loan? And is the property worth enough to justify the loan? To determine the latter, the bank or mortgage broker will hire a licensed appraiser to estimate the value of the property.  
7. Bank issues a commitment letter.  After the bank has done its due diligence on the buyer and the property, it will issue a commitment letter. This is the letter that says the buyer is approved for the mortgage. It states the interest rate, amount, and term of the loan (among other things).  Once this letter is received you can schedule the closing.
8. Schedule the date of the closing. The seller, the buyer, their attorneys, the bank’s attorney, and a title insurer, will all break out their date books and figure out the best day to finalize the transaction (be patient, this can be harder than seating your relatives at a wedding).
9. Close.  This is where the rest of the money exchanges hands and the buyer gets the keys.  Essentially this is how the money will be distributed:

• a) The seller’s attorney will write a check to the seller from her escrow account. This will be equal to the check the buyer wrote when he signed the contract.
• b) The buyer’s bank will write a check to the seller for the amount that the buyer is borrowing from the bank. (That’s right; the buyer never gets his hands on the money.)
• c) If after steps a) and b), there is money still due to the seller, the buyer will write a check for this amount.In addition to all of this, with your attorney’s help, you will sign half a ton of documents(buyers, you will actually sign a ton and a half). Once you are done you can …

10. …Move!  In or out, depending on who you are. And you can almost always do this immediately after you close.

Feel free to forward any questions my way.  Thanks for reading, Jim.

The author demonstrates the Take Five method

People often solicit my opinion about a given neighborhood. “Is it safe?”,they ask. “How is the area? What are the locals like?”, etcetera, etcetera,… I flat out try to evade these questions and I have my reasons. For one, I’m very fond of the neighborhoods I work in and don’t feel capable of answering objectively (It would be like bad-mouthing a family member to an outsider). For two, other than the number of times I’ve been fleeced by the Department of Finance (see How to Park It), I don’t worry all that much about crime in my neck of the woods. And three, the locals question? I don’t even want to know what people are getting at there. So I don’t answer any of these questions. But this is what I do say. I say, “because everyone has a different comfort level when it comes to these things, you need to explore the neighborhood yourself. That means more than just a cursory look. You need to take five extra minutes with some of the residents and get to know them. Doesn’t matter how you do it, but you need to engage a few locals. Ask for directions or the best place to get coffee. Say good morning or good afternoon. Whatever it is, just talk to people. If you do this, I guarantee, that if you really do this, you will see the neighborhood and you will see the entire city of NY in a very different light.”

I can hear the collective moan coming over the big T1 line in the blogosphere. You are out of your mind Jim. This is New York City! You can’t just talk to people on the street. You’ll scare them, or they’ll be suspicious, or they’ll get mad. My experience has taught me otherwise. When I first started exploring Crown Heights, I would stop random people on the street and ask them what they were paying for rent. If anyone asked why, I would simply say that I was thinking of buying a three family building in the neighborhood and wanted to know what I could lease the apartments for. And you know what? People talked to me. They were friendly. They were nice. They were very helpful. I even got invited into someone’s apartment to have a look. I couldn’t believe it either, but I learned a valuable lesson about my city. Nowadays, I almost always say hello, good morning, and good afternoon and my neighbors usually say it back.

So you want to know about a neighborhood? Take five extra minutes and get to know its residents. Thanks for reading, Jim.

(Let it be known that I type this post, whilst an 11 lb baby boy sleeps in a sling around my neck).

In my line of work, there is plenty of ambiguity. I’m often not sure how to get the best return for my limited time; or if I should spend money on hiring an Admin, or an SEO consultant; or if someone is telling me the truth; or, my least favorite, if a particular agent says he is working for the buyer or the seller is he really? This last one frequently bites people-especially inexperienced buyers-in the derriere. Why is that? Real estate transactions and residential real estate in particular, are often negotiated through third parties. In these instances, you want to unambiguously trust the person you’ve hired.

I’m sure you’ve all walked into an open house and had the agent, i.e. the seller’s agent; tell you that the owner was flexible or would take much less than the asking price. Say what? That agent, in theory, is working on behalf of the seller, their client. So why are they lowering the asking price behind the seller’s back? Furthermore, I’ve had “buyer’s brokers”^[1] come to my open houses and tell me things like, my client will offer X, but I think that she can go as high as Y. Well thank you for that information, Sir or Madam. Now I’m going to go right back to my client and tell him to counter your client with Y+Z.

Granted, these examples don’t typify all agent/brokers, but they do represent some. One problem is the business is very loosely regulated and the requirements are slim (in New York State, it’s just as difficult to be licensed as a cosmetologists, not that I’m knocking cosmetologists).

My point, after all of this, is that you need to hire a real estate attorney before you enter into a transaction. They are highly educated, they work only for you, and they eat, sleep, and breathe the attorney-client privilege thing. Whatever you say to them is between you and them. Everything they do is for the benefit of you, the client. Nice huh?

Here are just some of the services they’ll provide:

• Draw up and negotiate a contract of sale;
• Order and Review Title Insurance;
• Review all bank documents;
• Review a co-op’s or condo’s offer plan, financial statements, and meeting minutes;
• Attend the closing;

And if that’s not enough, they’ll answer all of your questions honestly, and have nothing at all to sell you. Their only focus is completing the transaction for you. They also provide a fresh, impartial set of eyes on your deal – which is particularly helpful to first-time buyers and buyers who are, themselves, lawyers (yes, you lawyers should hire lawyers too).

That’s all for now. Thanks for reading, Jim.

Closing costs are called closing costs because they are generally paid at the time of the closing. They fall into two categories. Those paid to a government entity, usually in the form of taxes, and those paid to the various professionals you hired at various stages of the transaction. These include your broker, your lawyer, the bank, the appraiser, the title closer, etc. That’s right, indirectly; you did hire a title closer.

The next several posts will explain and help you calculate your closing costs for several scenarios. Here’s how things will breakdown.

• Closing costs for a residential sale.
• Closing costs for a residential purchase.
• Closing costs for the purchase of a newly constructed condo.

Stayed tuned, all will be explained soon. Thanks for reading, Jim.

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.