New York's Cooperative and Condominium Community

Habitat Magazine October 2020 free digital issue

HABITAT

Subscribe for Daily Updates!
Amount of financingAug 08, 2007


Currently our building allows maximum financing of 80% for shareholder loans. In light of incredible valuation increases for apartments in our midtown Manhattan building there has been some talk about reducing the maximum financing allowed to a level of 70%.

What do your buildings require....and is this a valid concern?

Thank you.

Join the Conversation Comments (4)
to Gabrielle - Batch Aug 09, 2007


Oh, yeah. Let's make midtown Manhattan apartments totally for the rich.

Good grief.

Thank you for rating!

You have already rated this page, you can only rate it once!

Your rating has been changed, thanks for rating!

Introduce yourself to other members of Board Talk! Login below or register here.

Board Talk members who registered prior to March 9th, 2016 will need to reset their password.

Register

Forgot your password? Click here

> Join the conversation Comments (2)
to batch - gabrielle Aug 09, 2007


Lighten up Batch. As a repsonsible board we are concerned that certain shareholders may end up over extending themselves. If that occurs, foreclosures can follow...and no board wants any of their units to go into foreclosure.

Get a grip.

Thank you for rating!

You have already rated this page, you can only rate it once!

Your rating has been changed, thanks for rating!

Introduce yourself to other members of Board Talk! Login below or register here.

Board Talk members who registered prior to March 9th, 2016 will need to reset their password.

Register

Forgot your password? Click here

> Join the conversation Comments (1)
to Gabrielle redux - Batch Aug 10, 2007


As a responsible board, are you also concerned that you would be probably be requiring people to put up 10% more money from their family's liquidity?

Of course no one likes foreclosures. So why put more monetary pressure on people?

You should be more concerned that they are able to make their monthly maintenance payments, with sufficient cash reserves to handle any assessments.

Forcing people to surrender unnecessarily large downpayments is one way to keep out the kind of lower-income people your board obviously doesn't want. These kinds of discriminatory policies are part of what's behind measures like 119 in the NYC Council.

My grip is pretty firm, thanks.

Thank you for rating!

You have already rated this page, you can only rate it once!

Your rating has been changed, thanks for rating!

Introduce yourself to other members of Board Talk! Login below or register here.

Board Talk members who registered prior to March 9th, 2016 will need to reset their password.

Register

Forgot your password? Click here

> Join the conversation
Re: to Gabrielle - GK Aug 10, 2007


"Oh, yeah. Let's make midtown Manhattan apartments totally for the rich."

News flash: they already are ;-)

Thank you for rating!

You have already rated this page, you can only rate it once!

Your rating has been changed, thanks for rating!

Introduce yourself to other members of Board Talk! Login below or register here.

Board Talk members who registered prior to March 9th, 2016 will need to reset their password.

Register

Forgot your password? Click here

> Join the conversation Comments (1)
to GK - Batch Aug 11, 2007


Even the rich aren't rich anymore.

Only the FILTHY rich are rich.

Thank you for rating!

You have already rated this page, you can only rate it once!

Your rating has been changed, thanks for rating!

Introduce yourself to other members of Board Talk! Login below or register here.

Board Talk members who registered prior to March 9th, 2016 will need to reset their password.

Register

Forgot your password? Click here

> Join the conversation
Well, it all depends! - AdC Aug 09, 2007


Some ideas for you:

The theory behind larger equity is that shareholders will treat the property as its own, i.e., there will be a higher regard for the building because you have more vested by way of your own money.

1. The argument may hold some water, but I've seen shareholders who own their 100% equity on their shares and their apartments are kept in deplorable conditions.

2. Some shareholders have put down 10% or 20% and have decided to invest in upgrading their units and go ahead and spend 40K or more to re-do kitchens, bathrooms and other luxuries.

I think the problem is admissions: how good are you in detecting investors or individuals who wish to flip units without putting a nickel into the unit. I think in 80 or 90% equity there is the suspicion that the buyer intends to flip the unit at a higher price to liquidate the mortgage which finances 80 or 90% of the unit.

However, bottomline is that if people can afford a mortgage at 6.35% fixed, 30 years and only but 10-80% equity and meet their financial obligations, they will rather do it if they do not have to commit their cash and use it for other creating wealth elsewhere. This is the premise of many businesses and the mentality of a free enterprise that we so adore.

Good luck!

AdC






Thank you for rating!

You have already rated this page, you can only rate it once!

Your rating has been changed, thanks for rating!

Introduce yourself to other members of Board Talk! Login below or register here.

Board Talk members who registered prior to March 9th, 2016 will need to reset their password.

Register

Forgot your password? Click here

> Join the conversation
Well, it all depends! - AdC Aug 09, 2007


Some ideas for you:

The theory behind larger equity is that shareholders will treat the property as their own, i.e., there will be a higher regard for the building because you have more vested by way of your own money.

1. The argument may hold some water, but I've seen shareholders who hold 100% equity on their shares and their apartments are kept in deplorable conditions.

2. Some shareholders have put down 10% or 20% and have invested over $40K in upgrades to their units, i.e., new kitchens, bathrooms and other luxuries. Thus, adding value to the building.

I think the problem is admissions: how good are you in detecting investors or individuals who wish to flip units without putting a nickel into the unit? I think with 80 or 90% debt there is the suspicion that the buyer intends to flip the unit at a higher price to liquidate the mortgage which finances 80 or 90% of the unit.

However, bottomline is that if people can afford a mortgage at 6.35% fixed rate for 30 years and only but 10-80% equity, meet their financial obligations w/o going into great deal of sacrifice, they would rather do this if they do not have to commit their cash, which may be used for creating personal wealth by investing it. This is the premise of many businesses and the mentality of a free enterprise that we so adore.

Good luck!

AdC






Thank you for rating!

You have already rated this page, you can only rate it once!

Your rating has been changed, thanks for rating!

Introduce yourself to other members of Board Talk! Login below or register here.

Board Talk members who registered prior to March 9th, 2016 will need to reset their password.

Register

Forgot your password? Click here

> Join the conversation
Re: Amount of financing - AR Aug 09, 2007


One of my buildings just made it 30-70 split and i am actually recommending it to some of my other buildings that warrant it.

The good thing is, in a changing market, even if the market dips a little, you (the board) still maintains a safe amount of leverage in case of foreclosure. You have to figure if a shareholder is months behind, then there are foreclosure fees on top of that, then late fees, legal, etc, that can eat up the typical 10-20% easily. then if the market is soft, the Coop is behind.

While yes, it does make it harder on some new buyers, it creates a more solid structure for the corporation and for the shareholders who are there at current... and that is where your concerns should lie.
Best
~AR

Thank you for rating!

You have already rated this page, you can only rate it once!

Your rating has been changed, thanks for rating!

Introduce yourself to other members of Board Talk! Login below or register here.

Board Talk members who registered prior to March 9th, 2016 will need to reset their password.

Register

Forgot your password? Click here

> Join the conversation Comments (2)
"bottom line" - Batch Aug 10, 2007


While I am fully aware that co-ops are corporations, and thus businesses, they are also HOMES.

Can we have a little sympathy for the poor schlubs who come up against boards that are so anxious about their bottom line that they overlook they might be turning away terrific people who would make excellent neighbors... great shareholders...

simply because they can't afford to tie up 10% more on a million-dollar apartment? That's $100,000, folks. Real money. Money they might have saved for a college education, medical emergency, entrepreneurial investment or long-term care for a parent. Gone because some bean-counting board wants "leverage" in case of foreclosure. Good grief.

Evidently, home is now where the bankbook is.

What is this country coming to?? I guess, the bottom line.

Thank you for rating!

You have already rated this page, you can only rate it once!

Your rating has been changed, thanks for rating!

Introduce yourself to other members of Board Talk! Login below or register here.

Board Talk members who registered prior to March 9th, 2016 will need to reset their password.

Register

Forgot your password? Click here

> Join the conversation Comments (1)
welfare mentality - AR Aug 10, 2007



You seem to have a warped view concerning who lives in a building and who does not. It is this same perception that says to permit people into this country and let us pay their health insurance, give them housing and food stamps, just because they deserve a chance...

In other words you think that a person should be permitted to become a shareholder on the basis of them being a nice neighbor. Sorry to bust your bubble, but it does not work that way. A board has a fiduciary responsibility to the building/Coop/corporation or whatever you want to call it and must abide by it. Numbers do matter, leverage is important and the responsibility to maintain a financial healthy coop is more important than "excellent neighbors".

At the end of the day, when the nice neighbor cant pay, is over leveraged in other areas of his/her financial and has too many debts to pull out of (just because that is the unfortunate American way and the foreclosure rate today confirms this), and the apartment isn’t worth the amount paid for... are you willing and able to pay? Because when your maintenance goes up because of the legal bills associated to the coop and the lack of revenue to the building for an extended period because the good neighbor didn’t pay for a year, you will have to.

So yes, home is where the bank book is, especially when a Board has to manage other peoples homes and be responsible for the outcomes.

Notwithstanding the aforesaid, once desirable conditions are met by the prospective shareholders, then, and only then do we seek the intangible assets that a shareholder may bring to the building.

And that is the bottom line.

Thank you for rating!

You have already rated this page, you can only rate it once!

Your rating has been changed, thanks for rating!

Introduce yourself to other members of Board Talk! Login below or register here.

Board Talk members who registered prior to March 9th, 2016 will need to reset their password.

Register

Forgot your password? Click here

> Join the conversation
Recognizing all are not equal - AdC Aug 10, 2007


I'm glad you qualified your first statement by stating the following:

"One of my buildings just made it 30-70 split and i am actually recommending it to some of my other buildings that warrant it."

Although our co-op does not have a practice of demanding a certain equity, we are VERY careful recognizing what is a "danger" signal on a 10-90% equity-debt mortgage. A good percentage end up being rejected, another portion end with parking an escrow for 18-24 months with the co-op.

Our record of late payments is virtually zero. We have one of two shareholders who may be late two months and they are immediately remitted to legal with a $50 late charge each month they are late.

So, collections are pretty good for the past 10 years.

AdC



Thank you for rating!

You have already rated this page, you can only rate it once!

Your rating has been changed, thanks for rating!

Introduce yourself to other members of Board Talk! Login below or register here.

Board Talk members who registered prior to March 9th, 2016 will need to reset their password.

Register

Forgot your password? Click here

> Join the conversation

Introduce yourself to other members of Board Talk! Log in below or register here.

Board Talk members who registered prior to March 9th, 2016 will need to reset their password.

Introduce yourself to other members of Board Talk! Login below or register here.
Board Talk members who registered prior to March 9th, 2016 will need to reset their password.

Ask the Experts

learn more

Learn all the basics of NYC co-op and condo management, with straight talk from heavy hitters in the field of co-op or condo apartments

Professionals in some of the key fields of co-op and condo board governance and building management answer common questions in their areas of expertise

Source Guide

see the guide

Looking for a vendor?