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Your Coop Purchase... What To Expect

Contract Negotiation and Due Diligence

  • The transaction summary sheet has been prepared and sent to us; we will begin our due diligence, fully investigating the cooperative corporation, finances, building and Unit.
  • Simultaneously, we are negotiating the contract, to ensure it contains all relevant components of the deal that was struck, and in addition, we add a Purchaser’s rider, to include protections for you and get representations from the Seller.
  • Once contracts are negotiated and you’ve been provided with a summary of our due diligence, you will sign the contracts and they’ll be sent to the Seller’s attorney, along with your check for 10% of the price, as the down payment. The Seller will then countersign, and fully executed copies are sent back to us, along with notification that your down payment has been deposited into the Seller’s attorney escrow account, where it is held and applied towards your funds for closing. The day the fully executed contracts are returned to us is the date of the contract.

Financing

  • Once “in contract,” you will need to work closely with your mortgage broker or bank representative, ensuring they have all requested and necessary documentation from you. DO NOT LOCK IN A RATE UNTIL YOU ARE CERTAIN YOUR LOAN REPRESENTATIVE HAS SEEN A COPY OF YOUR CONTRACT AND UNDERSTANDS THE “ON OR ABOUT DATE”. Remember that in New York, closing dates are not exact, and “on or about” means a 30 day window in which to close. All too often Purchasers lock in a rate too early and are faced with extension fees. Remember, when the Coop Board reviews your application and interviews you remains an unknown, so some flexibility is necessary. You should inquire if the loan product you are acquiring has extension capability and associated fees just in case the closing is delayed.
  • Understand that a “pre-qualification letter” is NOT a loan commitment. The Loan Commitment Letter is issued by the lender only after they have reviewed your documentation, have done a credit report and agree to fund the loan, subject to additional conditions that may appear on the Commitment.
  • It is important to arrange for your lender to perform an appraisal on the premises as quickly as possible; the bank and your real estate broker will ensure the appraiser has access.
  • If your contract is NOT contingent on financing, if you are unable to secure a loan commitment letter, you are still bound by the terms of the contract and will be expected to close. If your contract IS contingent on financing, you will have a specified period of time (most often 30 calendar days from the date of contract), to submit your Loan Commitment Letter, along with the Coop Board Application Package. If at the expiration of this period, if you are unable to secure the Commitment , after making a full good faith application, you will be entitled to cancel the contract and receive the down payment back, or if you desire, you may ask the Seller for an contingency extension, allowing you additional time to secure the Commitment Letter
  • The Loan Commitment will have conditions: for example, additional bank statements or pay stubs be submitted, written explanation of any irregularities in previous employment or credit history, etc. Normally a loan commitment will not be considered a binding commitment, until the bank has received a satisfactory appraisal.
  • With few exceptions, once the Loan Commitment has been issued the contingency period is essentially over; you will still be bound to the contract, even if you are unable or unwilling to satisfy the remaining conditions of the Loan Commitment. We will discuss with you the particularities of your own Contract – often we are able to have a Seller agree to let you terminate the contract, if the loan is rescinded by the lender, due to something relating to the Cooperative, and not you.

The Bank Attorney

When financing, once the Commitment is issued, you should be receiving some communications from the lender’s attorneys. They will be sending you 3 important items:

  • The UCC 1 Authorization Form – enables the bank attorneys to “register” the loan (normally requires a fee ranging from $90-$120). This form and the check should be sent back to the lender’s attorney per their instructions.  
  • The Lien Search Request Form – if you choose, the bank attorney can also order the Lien Search (a report that discloses all existing liens against the apartment). We can do this for you as well – the choice is yours.  
  • Three copies of the Cooperative Recognition Agreement, also called the “Aztec Forms”; this is an agreement whereby the bank and Cooperative Corporation recognize the responsibilities and obligations towards the other, in the event of a loan default. All 3 will be pre-signed by the lender; you will need to sign them as well, AND DELIVER THEM TO YOUR REAL ESTATE BROKER, OR TO OUR OFFICE SO THEY CAN BE FORWARDED TO THE COOPERATIVE BOARD.

The Board Application

  • If there is a real estate broker working on your transaction, they will provide you with a copy of the Coop Board application package. If not, we will acquire the necessary paperwork for you. Your broker will provide additional instruction for the completion of the package; most likely, the same documentation you have assembled for your mortgage will be needed in the board package. There may also be the requirement for letters of recommendation and another credit check. This is all normal and while seemingly a bit invasive, is all part of the Cooperative process.
  • Remember to provide ALL information that is requested. In the event that the Board does not accept your application, you will receive your entire down payment back, PROVIDED YOU APPLIED IN COMPLETE GOOD FAITH – nothing has been falsified, misrepresented or willfully excluded. If you are not seeking financing, the Board Package must usually be turned in between 10 and 20 business days from the date of contract. If financing, you will normally have 30 calendar days from the date of contract, OR within 3 business days from the date you receive your Loan Commitment. It is prudent to begin working on the Board Package as soon as you are “in contract.”

Getting Ready To Close

  • When your loan has been fully approved, it is called “clear to close.” This is a term you will likely hear frequently as we get near a closing. Remember that only the bank’s attorneys (not mortgage broker or bank representative) will give the final clearance – we are in constant touch with these attorneys and will keep you informed.
  • You will be notified by the Coop Board that your application has been approved that an interview (in most cases) will be scheduled. Again, in most cases, you will be required to attend the interview in person. If you are working with a Real Estate Broker, they will be able to assist you in preparing for the interview.
  • Normally, the board will issue its decision shortly after the interview. Once you have been approved by the Board, and your loan is clear to close, we can schedule a closing date. In all likelihood, the bank attorneys will not solidify a date until your loan is “clear to close.” Your “first choice” of closing date may not be available (or even the second, for that matter). It frustrating in New York, as you likely cannot confirm movers and other plans until we have the firm closing date. Please be patient, be a little bit flexible, and of course, it always helps to have a sense of humor.

Closing Day

  • It is quite likely that you will not receive your closing statement and check instructions until right before the closing. This is the process in NYC, and while extremely frustrating, is not unique to your transaction. If you are purchasing “all cash”, we will most likely be able to provide you with your check instructions earlier than if you are financing. With a loan, we must wait for the lender’s attorney to provide us with the “net proceeds” on the loan; Net Proceeds is the amount the bank actually brings to the closing. For example, if your loan is $500,000, the bank may really come with $496,239.87. Why? Because the bank takes all of their fees right off the top of the loan. You are still borrowing $500K, but they collect underwriting and processing fees, appraisal fees, bank attorney fees and the remaining mortgage interest for the month in which you close, right from the mortgage; consequently, until we get that number from the lender, we cannot tell you the exact amount of the checks you need to bring yourself. Be aware however, that you will likely need one or more Certified or Official Bank Checks, drawn from a bank that is a member of the NY Banking Clearinghouse.
  • Prior to closing you should schedule your “walk through inspection” of the Unit with your broker, to ensure that the apartment is in the condition as contemplated by the Contract. You should try all appliances and plumbing fixtures and look for any damage that was not apparent when you initially went into contract.
  • You should allocate approximate 2 hours for your closing. At the closing table we will be there, along with the seller’s attorney and possibly their clients, your bank attorney if you are financing, and the cooperative managing agent. Closings for coops are normally held at the coop management offices. Remember that we are here to make this transaction as “stress-free” as possible for you.

Please let us know if you have any questions about this information, or about your transaction in general.




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