What Is Conditional Coop Approval In NYC?
Go Back To Previous PageWell, you’ve done it. After you hunted for a fantastic co-op in New York City, put together an application, and got your
finances in order, you got approved. Well, kind of. According to the paperwork and the news your excited real estate agent gave you, you have a Conditional Coop Approval. But what does that mean in a real estate transaction? In New York City, that can mean you have some decisions to make. What does conditionally approved mean?
What Does A Conditional Co-Op Approval?
Most buyers will never deal with conditional co-op approval. What does conditionally approved mean? This form of consent means a potential co-op buyer is on the cusp of the financial requirements necessary to become a co-op member.
What you’re falling short of, though, can vary. Sometimes, it’s your FICO score, while it can be liquidity that’s putting you at risk in other cases.
Why Do Co-Ops Give Conditional Approvals?
Co-ops generally approve when they see a family or person they feel would be a fantastic fit for their community. However, their financial situation doesn’t quite match a typical buyer’s.
This type of approval is the co-op’s way of saying, “We want you in our community, but your finances are a little unstable for our liking. But we’ll be open to working with you if you let us.”
Are Co-Ops Required To Work With Potential Buyers?
Not. New York’s co-op scene is notorious for turning people away at the drop of a hat. Most co-ops won’t bother with conditional approval simply because they are confident they will find another buyer soon. If you want to buy from an “elite” co-op, the chances of getting a conditional Coop approval are squarely zero.
Generally, it’s a good sign that you are wanted if the co-op is willing to work with you. If you receive conditional approval, it’s best to act on it.
How Does A Conditional Co-Op Approval Work?
Conditional coop approvals can vary depending on the conditions they require. However, its basic gist remains the same. You can get the co-op if you meet specific financial requirements. Some common examples of conditions coop boards may suggest include:
- Asking for a year’s maintenance fees in an escrow account. This acts as a particular security deposit. The co-op can cover your yearly maintenance if you fall on hard times.
- Asking you to get a guarantor‘s signature before you can move in. A guarantor is a person (or business) willing to guarantee they’ll cover your costs if you cannot make ends meet.
- Asking for a higher down payment. Sometimes, this is all that a co-op will ask for. If you have liquidity, then it probably won’t be a problem. However, the offer may fall through if it already strains your wallet.
What Happens If You Agree To The Conditions?
If you love that co-op and get conditional co-op approval, you will probably fight tooth and nail to meet that condition. In most cases, you should be able to pull through. If you meet all requirements, the co-op board will welcome you aboard, and you can move into your new home. This becomes a final approval.
What Happens If You Cannot Meet The Conditions?
Unfortunately, you have conditional Coop approval. Your application gets rejected if you can’t meet the conditions and requirements. You won’t be able to move in and own the co-op unit you wanted. You will also have to keep searching for a place to stay.
Are You Allowed To Back Out Due To A Conditional Co-Op Approval?
You would think the answer is always yes, but sometimes, it’s not. This all depends on what the contract you signed said. Most co-ops will have a clause stating that the sale will go through with the “unconditional consent of the corporation.” This is your green light to back out.
However, suppose your co-op board’s attorney is slick. In that case, they may have included a clause that says you must automatically agree to the conditions outlined in conditional approval. For example, you might see a clause stating, “the buyer agrees that they will put up to one year of maintenance in escrow if the board deems it necessary for approval.” If you see this, you’re out of luck.
Can You Renegotiate The Terms Of Your Conditional Approval?
Sometimes, but once again, it depends on the fine print of your purchase agreement. For this to be okay, your contract must allow both
the buyer and seller to renegotiate the terms. This is smart if you want the co-op but can’t reasonably afford the conditions they ask for.
It’s a sound bargaining chip if you can renegotiate and walk away. Sellers are just as invested in pushing through a deal as buyers are. If they get desperate, you can devise an agreement that saves you money.
When Should A Conditional Approval Be A Red Flag?
Conditional approval will rarely be a red flag for a real estate sale, and it’s not like most co-ops will arbitrarily decide to add conditional approvals to get more money. However, some co-ops are more notorious for conditional approvals than others. If you aren’t sure whether you can handle being “hit up” for more payments upfront, it’s good to ask your real estate agent if the co-op is known for pulling this move.
The only time a conditional approval is a red flag is if the co-op has a bad reputation or many families are moving out en masse. This suggests that something isn’t going well with the community here.
Can Condos Offer Conditional Approvals?
Condos are not allowed to offer conditional approvals in New York City. So, if you want the option of having conditional approval, it will have to be a co-op that you pursue. It’s worth noting that condo board members don’t have a right to accept or reject a buyer, and if you see a condo offering conditional approval, you don’t have to take that.
Condos can only buy the apartment for sale or waive their right of first refusal, and they are not allowed to try to get you to grovel for a place. If you see this happening with the condo you want, it’s time to push back hard with a lawyer.
Heck, you might want to reconsider moving there. That’s predatory behavior and shouldn’t be condoned.
The Best Advice You’ll Get About A Conditional Approval.
If a co-op offers you conditional approval, the best thing you can do is review the conditions with your lawyer or real estate agent. (Actually, both are ideal.) The advice of an experienced professional is always the best thing you can have when navigating a real estate scene like New York City‘s.
So don’t be afraid to contact your NestApple real estate brokers.
