Read this article in the digital edition.
She sashayed into my office like she owned the place, and when I saw her, I was ready to hand over the keys. You could tell this dame was prime real estate, with legs like a high-rise condo on Where-Have-You-Been-All-My-Life Street. “I hear you can help me,” she said, with a voice that melted the ice in my bourbon. “I need to buy an apartment. And I don’t care how I get it.”
I looked her in the eye and sized her up like an appraiser doing square footage. I knew her type. She’d come into some dough, or maybe saved it up. She was tired of renting, or living with her folks or her ex-whatever. Now she wanted a place to call her own. She thought it’d be easy – mooks from Maine to Montana buy houses every day. But an apartment in New York City? This dame was standin’ on Staten Island without a clue she was about to run the marathon.
“Co-op or condo?” I asked, offering her a chair. She didn’t seem the townhouse type.
“Does it matter?” she said, leaning in so close I could see the hunger in her eyes. I tried to imagine how that would go over in a co-op admissions interview.
“It matters,” I said. “A condo is real estate, see? Unless you’re paying all-cash, that means you take out a mortgage just like buying a house. But a co-op? Here’s where things get interesting.” She leaned back. I was losing her. I had to talk quick.
“A co-op can reject you,” I announced, cutting to the heart of it. “It’s a corporation – a corporation that sells shares. It’s like buying stock – stock that just happens to correspond to such-and-such apartment! And you don’t take out a mortgage – you take out a loan.”
I knew that was mostly a technical difference; lenders and the IRS basically treat them the same. But I had bigger news to give her.
“These corporations are like private clubs, sweetheart. If they don’t like your finances, your reputation or anything else that doesn’t involve discrimination based on race, religion, or a dozen other ‘protected classes,’ they don’t have to let you in. Sayonara, Charlie – they don’t even need to tell you why. But if a condo association doesn’t like you, it doesn’t have a lot of slugs in its gun – basically, but not exclusively, just ‘right of first refusal,’ to buy the apartment out from under you and sell it to someone else. Still interested?”
“I hear you, gumshoe,” she said, looking weary. I lit her cigarette and decided not to tell her about the increase in smoke-free buildings, where smoking was as welcome as a cat at a mouse club meeting. “And I still don’t care. Co-op or condo. It doesn’t matter. Not after what I’ve been through.”
That did it – I’m a sucker for a hard-luck story. I agreed to take her case. That meant calling on my usual contacts: a real-estate lawyer, co-op and condo board members, a broker or two, and even a seller. This wasn’t going to be pretty. But if she was going to buy an apartment in New York, she had to come with me and learn this all for herself. There was no other way.
The Broker: Trouble Is My Business
“If you’re a first-time buyer, there’s a lot of hand-holding.” That was Kate Burton; she’s a licensed salesperson at Halstead Property. I wouldn’t have minded holding the dame’s hand, but I didn’t want to distract Kate. “Even with people who have bought before, they take a lot of paying attention to, since it’s such a big financial commitment. It can be a $300,000 place or $3 million. Either way, it’s a lot of money for them.”
“People aren’t born with this information,” chimed in Miriam Sirota, a senior VP at Brown Harris Stevens. Good old Miriam. She’d been around the block. What two of my favorite ladies were doing at one of my favorite watering holes, I didn’t ask. I had other questions – like, “What’s the first step? Before the lawyers or the boards or the grifters or the cops all stick their noses in, what does she have to do?” I said, pointing my thumb at the dame.
Miriam had an answer. She always had an answer. “They come to me and say, ‘This is what I want, these are my needs, this is what I know and don’t know about the market and what I want to spend.’ And I tell them, ‘Look, this place is great for what you want. And you can afford it.’ Or, ‘For this amount of money, there’s no way in hell you’re going to get what you’re looking for.’ Or, ‘You’ll never pass a co-op board. You need a condo.’” That’s what I loved about Miriam. She talked straighter than a laser pointer marking a plumb line.
“The first thing a broker needs to know when they meet a buyer is [the buyer’s] qualifications,” said Kate, eyeing the dame up and down like she wanted to hand her a business card. “Do they have a pre-approval letter from a bank? And then the bank, nowadays, also has to approve the building.” This was new, and I thought I’d heard it all. “You have to get the bank the [pertinent] information [about the building] – the financials, the offering plan, all of that – and make sure the bank approves. The broker traditionally gets all that from the managing agent as soon as [the broker gets] the listing. The bank also can do that. It’s all done by phone, e-mail, and fax. Nobody does anything in person at that level.”
So far, so good. But now I had to leave the dame behind for a while. Where I was going, she couldn’t go. I had to go see the woman they called...The Seller.
The Seller: The Long Goodbye
She was dark and sultry and went by an alias, Antoinette Blanco. And earlier this year she’d sold her prewar co-op on the Upper West Side. She was ready to talk. I was ready to listen.
“Be careful who you hire as a real-estate broker,” she warned me. “Make sure their priority is to sell the apartment for what it’s worth and not try to rush the deal to just sell it and go on to the next client.” And how do you do all that? I wondered. “A lot of it is through the reputation of the firm – and also instinct. Do you think they’re competent and will do a good job? Are they going to spend enough time on your apartment?”
It all sounded vague to me, like promises made by a man and a woman at the end of a long night. But I got it. You can look at all the internet chatter you want about this broker or that broker, big company versus a boutique, and you can get word-of-mouth recommendations from doormen, people in your building, or your friends and co-workers, but it all comes down to this: does the babe make you feel she’ll have your back when the buyers start lowballing?
Blanco, the seller, eventually wound up satisfied, but the going had been rougher than back-shelf bourbon. “I felt in my particular case the ad could have read differently,” she said with a sob. Her place was a bright and roomy two-bedroom with polished hardwood floors, original molding, classic mosaic-tile bathrooms, and – the one drawback – a kitchen that hadn’t been remodeled since the ’80s. So the broker wrote “needs TLC.”
“I thought that was unnecessary,” said Blanco, as though someone had slapped her. “The appliances could have used upgrading,” she allowed, “but ‘needs TLC’ makes you think there are holes in the walls and peeling paint, and that wasn’t the case.” I made a mental note to tell the dame not to pay too much attention to listings lingo. Look at the online photos and see the place for yourself.
And you need to do that last part more than my mother’s stew needs salt. That’s because of this new thing called “virtual staging,” where you Photoshop furniture and such into a picture of the place, and put it online.
“By law, [the ad or listing] has to say it’s virtually staged,” Miriam told me later, at my place over two stiff drinks. “We do it for empty apartments, since empty apartments look like crap on a website.” Mine looked like crap, but she was too polite to say so. “We have a marketing company that virtually stages an apartment so that it looks swanky,” she went on. “Not to trick the buyer, but to have them see a space with stuff in it and have a sense of what it would look like with proportionate furniture.” I could live with that – better than I could live with a bullet from her roscoe if she’d ever decided I’d crossed her.
I hooked up again with the dame after she’d found a co-op apartment and had her offer accepted. That sounds simple, but it wasn’t: she and her broker had to compare the seller’s asking price with what other apartments were selling for in the building and in the neighborhood. Then they’d factored in how long the place had been on the market and how badly the seller wanted to sell.
Even before reaching that point, the dame’s broker had to vet her finances and make sure – as best as one could, since co-op boards don’t routinely blab about it – that those finances were good enough for the board.
“It’s deductive reasoning,” said a shadowy broker who wouldn’t give me her name but who seemed to know her stuff. “You may have colleagues who have worked that building and can give you information; you look online at sites like StreetEasy and PropertyShark to see what a board’s requirements are – although random database info might not be accurate. Database information is updated by real estate brokers, so that would have to be checked for accuracy. When the managing agent sends the broker a sales application, that also gives you an idea of what’s needed. And the seller’s broker should be able to find out what the co-op usually wants beyond the sales price,” such as requiring that the buyer have anywhere from two months’ to two years’ worth of mortgage and maintenance in the bank, or even more.
The Lawyer: Farewell, My Lovely
Now it was time to talk to the dame’s mouthpiece. Adam Leitman Bailey had made a name for himself writing books about real estate, like Finding the Uncommon Deal (2011). He had a pretty swell set-up, down on Broadway near the courthouses. He was the kind of guy that judges called, “Your honor.”
“Most rudimentary sales of properties in New York are typical,” he assured me, walking to a liquor cabinet and offering me a shot of bourbon. “Every attorney uses the same contract in almost every transaction.” I told him to walk me through it and to take his time. I could be slow. Real slow. “The seller sends out a contract of sale. The buyer’s attorney reviews it and usually adds a rider to give more protection to their client. You make the seller’s attorney earn their fee by beefing up the contract a little.” He smiled. I shivered.
His man Friday, Guy Arad, poker-faced, showed me the Bailey proprietary rider, which said things about appliances being in working order, and the seller having to say if he’d made any complaints to the board about noise, bugs, offensive odors, or conduct or other quality-of-life things in the past 12 months. Smart.
And smart for both sides of the street. “What the seller wants to be sure of is not getting sued for not disclosing something,” Bailey said. And to help make sure the seller doesn’t put his size-12 brogans in his mouth, saying something that could come back and hit him in the keister, leading to a complaint of discrimination, he said, “I recommend they never meet the buyer, and just deal with the broker.”
The Board: Playback
The dame was buying a co-op, it turned out. That means the whole admissions process could still scotch the deal. To give the dame some backup just in case, I headed to see my buddy Wayne Broome. Wayne’s on the board of 303 West 66th Street, a co-op of 415 units. His building’s gotten to where it runs like a clock, and I don’t mean falling down because it has no legs. “The chances of somebody getting rejected once they’ve been called for an interview [are] pretty slim,” he told me. That’s because if they’re going to reject you, they’ll have decided to do it from the financial information, and not even bother to call you in for a sitdown.
“It’s very important to separate the financial-review process from the admission process,” he said matter-of-factly. “If you’re going to reject based on finances, you need to do that before you ever meet that person or persons. Because once you meet them, there’s a face – and if they happen to be a member of a protected class and you reject them based on finances, you could be exposing yourself to trouble,” since they could conceivably claim it was a thumbs-down based on their race, creed, color, disability, marital or gender status, or any one of the specific protected classes.
He told me that his seven-member board has a financial committee made up of people who know their onions about that sort of thing. “Not everybody on the board wants to take the time nor necessarily has the expertise,” he said with a lopsided grin. “This way we have people familiar with what to look for. The financial committee will summarize for the rest of us the essential facts of the application: the purchase price, down payment, how much is financed, source of the financing – whether it’s a bank, a gift, personal savings – the applicant’s annual income, the debt-to-income ratio, and the liquid assets of the applicant post-closing.”
Don’t get me wrong – people get rejected from co-ops all the time. The board may not like your finances even when that creepy bank manager who looks like Peter Lorre on a bad day says you’re okay. And rock stars and Richard Nixon have all gotten rejected for reasons having nothing to do with money.
Worried, I hopped a cab to see Roz Sackoff, board president of the 142-unit condo The Bayside Mews, in Bay Terrace, Queens, to see what my client would have to face if the co-op turned nasty and she had to pull a switch and try getting into a condo.
“We become part of the process when the sales broker gets a commitment from the buyer,” Roz told me. “The buyer first has to make sure [he or she] gets a mortgage. Then they go to our management company and request an application. The application gets filled out and then submitted to several of us on the board. Also, since we’re a condo, we do not have an interview process.” Meanwhile, “The management company gets a criminal report and a credit report for us.”
Some boards have amended their governing documents to allow them to reject buyers with criminal records. Generally, though, all a condo board can do is exercise its “right of first refusal” and buy the apartment itself. It sends the buyer a waiver of the right of first refusal if everything’s jake.
But I shouldn’t have worried. For the dame, it all worked out. Her finances were good enough for both the bank and the board. And there were no trashed hotel rooms, loud guitars, or Watergate in her past. It’s like that in this business. You wear out a lot of foot leather running down possible set-ups, and then it just turns on one question: how much does she make?
Still, my guess is that when they got a look at her during that admission interview, they were ready to hand over the keys.
The Buyer Wants In:
Tips for Boards
Vet the finances yourself. The buyer’s broker typically vets the buyer’s finances before agreeing to represent the buyer in the purchase of a co-op apartment, but you’ll want to do your own vetting as well.
Tell the buyer what you expect. With both co-op and condo purchases, the buyer gets a mortgage commitment, then fills out the building’s sales application, which the managing agent supplies to the buyer’s broker. The building’s sales application represents an opportunity to give the broker and buyer a realistic idea of your co-op’s requirements.
Don’t meet the applicant unless you’ve made a decision to accept. The chance that your board will reject someone because of their admission-interview performance should be very slim. Rejection or acceptance should be made from the financial information and any criminal or other background check. If you reject after meeting the buyer, the buyer may claim discrimination based on one of 14 protected classes (including race, religion, marital status, sexual orientation, and disability). In any event, the board should not meet the buyer until the actual admission interview. Condos have no admission interview, but if the buyer’s finances look shaky, condo boards generally have right of first refusal to buy the apartment instead.
Have a financial committee on your co-op or condo board. This allows board members with a financial or business background to go over the finances and summarize the essential facts for the rest of the board: purchase price, down payment, how much is financed, source of financing, the applicant’s income, debt-to-income ratio, and liquid assets post-closing.