What's the Deal with Buying an Apartment Directly from a Sponsor?

Aug. 24, 2015 — I want to buy an apartment directly from the sponsor. Is that a problem?

That depends on who you are talking to. If you are a prospective buyer, the answer is that it is not a problem. In fact it is a much easier way to purchase into a co-op. When selling an apartment, the sponsor is exempt from following the board's guidelines and interview process, so purchasers of sponsor units do not have to go through the co-op's lengthy application packages and review process and do not need a board interview to purchase. This can save considerable time and money for the prospective shareholder.

As long as the sponsor performs due diligence in qualifying the applicant there is usually not a problem; however, many boards feel that the sponsor's only interest is in selling the apartment and therefore is not invested in putting applicants through extensive background checks that cost money.

Many times we hear complaints that purchasers of sponsor units do not even get a copy of the house rules. We recommend to boards that they should invite the new shareholders to an informal welcome meeting to say "hello" and inform them of house rules and other issues. That way, the new shareholders can be informed. This usually leads to a "good neighbor" feeling and also accomplishes the board's goal.

David J. Amster is president of PLI Management.