Featuring real estate articles and information to help real estate buyers and sellers. The Nest features writings from Georges Benoliel and other real estate professionals. Georges is the Co-Founder of NestApple and has been working as an active real estate investor for over a decade.
Well, you’ve done it. After you hunted foguar 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 New York City, that can mean that you have some decisions to make. What does conditionally approved mean?
A conditional co-op approval is something that most buyers will never deal with. What does conditionally approved mean? This form of consent means a potential co-op buyer is right on the cusp of the financial requirements necessary to be 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.
Co-ops generally give this type of approval when they see a family or person they feel would be a fantastic fit for their community. But don’t quite match the financial aspects of a typical buyer. 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’re going to be open to working with you if you’ll let us.”
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 that they will find another buyer in a couple of months. If you are looking to buy from an “elite” co-op, then the chances of getting a conditional Coop approval are squarely zero.
As a general rule, it’s a good sign that you are wanted if the co-op is willing to work with you. If you get a conditional approval, it’s best to act on it.
Conditional coop approvals can vary in the conditions they require. However, the basic gist of it remains the same. As long as you meet specific financial requirements, you will be allowed to get the co-op. Some common examples of conditions coop boards may suggest include:
If you love that co-op and get a conditional coop 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.
Unfortunately, you have a conditional Coop approval. If you can’t meet the conditions and requirements set forth, then your application will be rejected. You won’t be able to move in, and you won’t own the co-op unit you wanted. You also will have to keep searching for a place to stay.
You would think the answer is always yes, but sometimes, it’s not. This all depends on what the contract you signed said. The vast majority of 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 automatically have to agree to the conditions they outlined in terms of 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.
Sometimes, but once again, it depends on the fine print of your purchase agreement. Your contract would have to allow both the buyer and seller to renegotiate the terms for this to be okay. This is a smart move if you want to get the co-op but can’t reasonably afford the conditions they ask for.
If you are allowed to renegotiate and walk away, it’s a sound bargaining chip to use. Sellers are just as invested in pushing through a deal as buyers are. This means that if they get desperate, you can work out a deal that saves you a bunch of money.
A conditional approval will rarely be a red flag for a real estate sale. 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 that a conditional approval is a red flag is if the co-op has a bad reputation or if it seems like many families are moving out en masse. This suggests that something isn’t going well with the community here.
Condos are not allowed to offer conditional approvals in New York City. So, if you want to have the option of having a conditional approval, it’s going to have to be a co-op that you pursue. It’s worth noting that condo boards don’t have a right to accept or reject a buyer. If you see a condo offering a conditional approval, then you don’t have to take that.
Condos can only buy the apartment for sale or waive their right of first refusal. 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.
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 you are navigating a real estate scene like New York City‘s. So, don’t be afraid to reach out.