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“FINALLY! – What took so long?” That’s been said by many buyers and sellers when it’s time to close on their sale or purchase of a co-op apartment. As a co-op shareholder and residential real estate broker doing business in my own building from time to time, I find that it’s always challenging to answer buyers and sellers when they say, “Why is it taking so long to get through the approval process?” I reply with a standard retort: “Every co-op scrutinizes purchase applications carefully and in an essential chain of events taking as long as three months or more.”
To rush the process is taking a risk that our board won’t tolerate because of its responsibility to the cooperative corporation. New shareholders appreciate this fact once they’re in, but typically balk at it before – especially when the rate lock on their mortgage commitment is set to expire, their rental lease will terminate, and our board has not received its application package from our managing agent’s transfer department.
Moreover, some board members and shareholders who may have bought decades ago, when times were different, are naive about the amount of time and effort already spent in getting a deal to the point of presenting a board application package. Our increasingly restrictive financial regulatory environment, combined with personal and family stressors, affects every current sale or sublet transaction. The angst typically peaks when the application package finally gets to the transfer department of the management company then sits there for a week or so awaiting attention.
“Can’t you call someone to move this along?” is what I’m asked at this point, after having just missed the last board meeting by a few days because the appraisal or loan commitment was delayed due to a holiday or other intervention. I explain why the transfer agent has to wade through the myriad pages of contract, disclosures, disclaimers, financial documents, bank and credit statements, appraisals, pet and personal information forms, etc., to qualify and package it all in a palatable form to the board of directors. Besides that, he or she is managing other lending inquiries from banks and mortgage brokers for pending sales, besides doing the same for mortgage refinancings, which have virtually doubled this past year thanks to bargain-basement interest rates. It all takes time by someone who’s paid an average wage.
And this “run of the gauntlet” is a good thing why? Because one of the reasons Manhattan co-ops have been a solid investment is that the majority of residential properties are cooperatives whose boards scrutinize their transfers thoroughly and take their fiduciary duty seriously.
So what are we in the trenches to do besides blame the banks, management, brokers, lawyers, board directors, or the government? It would behoove co-op directors to review their transfer and refinancing processes to streamline them as much as possible in order to be “investment friendly” to as many banks and portfolio lenders as possible. I’ve been working with our board to update our generic co-op questionnaire and to address specific questions that have arisen from banks and attorneys and so that the outside world receives corporation information that is consistent, correct, and complete, with master insurance certificates, audited financials, J-51 status, capital plans, and other pertinent documents.
In this increasingly hurried and harried global high-tech world, certain protocols and procedures might need to be updated to expedite co-op transfers and sublets. For example, in my co-op, our bylaws require a physical meeting of several directors to interview prospective buyers and a quorum to vote on them, often hard to do between regularly scheduled monthly board meetings. So, I’m going to propose to our board members that they consider allowing a Skype interview on a case-by-case basis if prospective buyers can’t meet them in person. Let’s see how that flies!