Broker Insights: Making the Deal Work
Illustration by Marcellus Hall
Sept. 10, 2015 — The potential buyer's reported income is spiky, uneven. The board members have been told by the co-op's attorney to make choices based on the money he puts on the table, not on the charm he exudes with his Scottish accent. So what should they do?
My suggestion: think like a broker. You should try to make a deal — not squelch one.
For example, board members can try to make the above-mentioned deal work by looking at the liquid assets to see if there are sufficient resources to cover a revenue shortfall for that prospective shareholder. Or they could see whether there is a spouse who, for whatever reason, does not show up on the ownership papers but clearly has the resources to make everyone comfortable. Perhaps the adjusted gross income is relatively small, but the buyer clearly has an established business with a healthy cash flow that is his fallback position. Investigate further.
There are always possibilities if you want to make something work. I'm not talking about somebody who's totally inappropriate for the property, of course. As I said: think like a broker. A good broker knows how to make a match. He or she wants to make the deal and that won't happen if there isn't the proper "fit."
The co-op board approval (or disapproval) process has always been a dreaded undertaking for buyers and sellers, their attorneys, and especially their brokers. Buyers and sellers may be very rarely exposed to the sturm und drang of the process, but the broker has to come back to the same well week after week, month after month — and this water never gets sweet. Yes, if all goes well, there is a payday. While that never makes the process any easier, it does make it endurable.
To make the system work, boards should make a fellow shareholder's sale the priority that it is. The purchase application should be processed within a reasonable period of time through management and distributed to all board members promptly so an interview date can be set as soon as possible.
If you are a small co-op without a good deal of financial sophistication, especially when it comes to analyzing someone's complicated tax returns, consider giving that task to the co-op accountant or an outside CPA with a good reputation. You get an experienced financial person evaluating someone else's financial wherewithal, and that person's financial info can still remain private (that idea came from an old established and very well run Soho artist's co-op).
Siim Hanja is a licensed associate real estate broker at Brown Harris Stevens.
Illustration by Marcellus Hall