![credit: By Jennifer D. Ames (Own work) [CC-BY-SA-3.0 or GFDL], via Wikimedia Commons](https://livingrichcheaply.com/wp-content/uploads/2013/09/999LakeShoreDriveChicagoCoop.jpg)
credit: By Jennifer D. Ames (Own work) [CC-BY-SA-3.0 or GFDL], via Wikimedia Commons
As I mentioned in my previous post, we just moved to our new digs. In the last year or so, I’ve posted a few times about thinking about buying a co-op and signing the contract. When you purchase a co-op, you do not technically own the apartment, but you own shares of a co-op corporation that owns the building. So I’m not technically a homeowner, I’m a shareholder.
When I started researching about the co-op buying process, I saw an article where the writer said that a trip to the dentist to get his tooth extracted was a more pleasant process than the co-op application and approval process. I can’t say that the process was that bad, but I can see how it can be, especially for luxury co-ops in Manhattan with stricter guidelines and snobbier people. =)
Fees
Oh those pesky fees! Yes, you have to pay for the privilege to buy a co-op. Here are a list of fees I paid:
1) Non-refundable processing fee in the amount of $350
2) non-refundable credit report fee, in the amount of $75 per applicant (Don’t worry, they didn’t charge for a credit check of my 15 month old)
3)Non-refundable application fee in the amount of $500 (refunded if your application is denied). I’m sure what the difference between an application fee and processing fee is??
4) Move-in fee in the amount of $100
5) Move-in deposit in the amount of $400 (refunded when they determine that you haven’t scratched up their walls/elevator during the move and after they determine that you are in compliance with the rules, like having 80% carpeting)
The fees are to be paid using certified bank checks or money orders.
Application
The application consisted of about 30 pages asking pretty much everything they can ask about your financial situation. You also had to copy and collate 7 complete copy sets to submit. Here are a list of the main things they wanted:
–4 most recent paystubs
–3 most recent bank statements as well as other financial institutions (retirement accounts/investment accounts, etc)
–2 most recent utility bills
–Letter from your landlord (if renting) stating how much your rent is, how long you’ve lived there and that you are current on the rent payments
–3 personal reference letters (per applicant) stating what a wonderful person you are and what a wonderful neighbor you’ll make. Some co-ops require professional reference letters as well from co-workers and supervisors. I should have submitted a personal reference letter from Little LRC’s friends too, written in crayon explaining that he is very quiet and doesn’t like banging on the floor.
–Statement of Net worth They asked us to list all of our assets, which included not only your bank accounts and accounts with financial institutions, but also your vehicle, jewelry and furniture. They also asked you to list all your liabilities like mortgages, student loans or other debt. Surprisingly I never knew our net worth. While I do use Personal Capital to track my assets, it doesn’t include my wife’s accounts and did not include my pension information. Not sure it’s a pf faux paux not to know my net worth, but it didn’t really matter to me as long as we were living within our means and meeting our savings goals. Seeing your net worth is pretty cool and I was pleasantly surprised. I’m tempted to post it like other bloggers do, but I think I’ll keep it private for now.
–Passport sized photos of all applicants (Yes, they wanted a passport sized photo of Little LRC too. They’re lucky he sat still for 2 seconds to get a good shot!)
–Letter of employment from employer
–Mortgage Commitment Letter
–Copy of driver’s license or other government document establishing permanent residence in the U.S. I guess non-permanent residents are not welcome.
Deadline
As I mentioned, I had to submit 7 collated copies which included all the above documents. I spent a bit of money at Kinko’s and killed a bunch of trees making these copies. I was also there hogging the copier for a while early in the morning trying to get all the copies made before the deadline. Well there wasn’t an actual deadline, but I wanted to get the board approval ASAP and also, my mortgage commitment was good for only 60 days. You see, the co-op board only meets once a month, so if you don’t get it in before the first Friday of the month, you’ll have to wait until the next month. Oh and another thing, this was in July and this co-op board takes August off so I’d have to wait until September if I didn’t submit it on time! I submitted the application slightly late as the first Friday of July was a holiday and I didn’t get the mortgage commitment until that weekend. The co-op board was nice enough to take my application to review for July. They did inform me that the fees mentioned above had to be paid with certified checks or money orders and I wrote them personal checks. Argh…I need to pay more attention to the details! I ran to the bank (Little LRC in tow) to get them and ran back with the proper payment.
Co-op Board Interview
For our interview, it seemed more like a foregone conclusion. I think that the application package which includes all your financial details was sufficient. They did ask us a few questions regarding whether we had pets and told us to have thick carpeting so as not to disturb those below us. However, some co-op board interviews are more intensive. They want to make sure that you’re not going to be throwing wild parties in your apartment perhaps. However, I’ve heard that some questions can border or being racist. And of course they don’t need to state a reason for rejecting you so they can often get away with it.
Rules
One of the many complaints about living in a co-op or in a community with a home owners’ association is the various rules that you must comply with. There are pros and cons I guess. Not having rules may cause headaches when your neighbors do things that would annoy you. The con is that even though you are an owner, I mean shareholder, you still need to abide by other people’s rules. I haven’t had the time or patience to read through the book of house rules. Maybe I will break out the book one night when I need good reading material to help me fall asleep. However, a few of the rules I know of for my co-op are the 80% carpeting rule and no pet policy. If you want to make renovate or remodel, you can’t just call a contractor up, you first have to get the approval from the co-op board. And of course…fill out another application. When there’s an application, an application fee is no doubt included. There is also a deposit that you must submit which is refundable.
Jumping through hoops just to become a shareholder and putting up with rules set by a co-op board may not make sense to many. However, such is the realities of housing in the NYC metro area. Buying a house is prohibitively expensive for most, so buying a co-op is the only option if you decide not to rent. I don’t think there’s anything wrong with renting, but it made financial sense for us to buy a place now.
It’s definitely a personal decision whether to share your net worth with the world, but of course if you did we would be super excited to see it 😉 Public or not though, I like to track it just to see how it’s going over time and to have something measurable. It also tends to motivate me more too when I see it going up which might be a reason to review it every now and then on your side?
J. Money recently posted…Republic Wireless Motorola E Giveaway! (x2)
Yea, I know what you mean. Now that I know the number I am motivated to increase it and to keep track.
That seems like a tedious / expensive experience just to become a shareholder. I would probably go with a condo if I ever want to buy an apartment as they have less rules, but I think a SFH is my next best step for my family. I’m interested to know what area of NYC your in, as you probably could have gotten a co-op for 40% less right across the rive in NJ.
EL @ MoneyWatch101.com recently posted…The Reason People Subconsciously Do Not Save Money
Yea, condos are less restrictive but also more expensive. I live in Queens…NJ doesn’t make sense for me since I work in Long Island and my wife works in Queens.
What a pain Andrew!!! I have a friend who purchased a home in a co-op, and she said it took her months to get through the process and that the bank and mortgage approval was WAY easier than the co-op approval. At least you are in and hopefully enjoying your new home.
Shannon @ Financially Blonde recently posted…My First Podcast Ep 01
The bank and mortgage approval would have been way easier if not for an incompetent loan processor!
Ugh, sounds like a pain! Interesting to me that they as your net worth. Can’t wait to hear more about your new place, Andrew!
Laurie @thefrugalfarmer recently posted…Book Review: Cream City Hustle
Thanks Laurie!
Sounds like quite the process! It seems like NYC real estate is a whole different world compared to how it works in the smaller metro areas, suburbs, and smaller towns. I honestly never knew much about co-ops and probably couldn’t even explain it prior to reading your posts. I feel like I learned something valuable, so thanks for sharing and I hope you enjoy you’re new housing.
Oh – what’s the “80% carpet rule?” I can’t imagine they’d FORCE you to have 80% carpet? Does it mean you can only have carpet on 20% of the square footage or the other way around?
DC @ Young Adult Money recently posted…How to Get Started in Freelance Writing
Thanks DC. Well the 80% carpeting rule from I understand is that you should have 80% carpeting throughout the apartment excluding the kitchen and bathroom. I’m not sure how strict they are with this rule since I’ve seen people with a lot less carpeting but if your neighbor downstairs complains I guess they will enforce that rule strictly.
Why do they need so much information and why (in our digital age) do they need so many copies? It sounds like a massively over-complicated system and very intrusive too: I imagine many people are put off by having to open up about their finances like that.
Myles Money recently posted…Banana Milkshake #FrugalFriday #Video
Good point…maybe in the future!
Interesting. It sounds like the way some condos are sold here. I’m with J on your net worth. I love seeing other people’s net worths; however, I can’t speak for myself since I haven’t been brave enough to post mine. lol
Kalen Bruce recently posted…How to Create Good Habits (And Stick With Them)
Yea, I’ll have to think about that…and get approval from the boss! =)
Andrew congrats on the new place, I know you’ve been looking for a while. Hope it’s got enough space for your family.
Thanks Charles. It’s a good amount of space now…not sure if it’ll be enough if our family grows, but we plan on being here for a good amount of time.
Uff, and I thought we’re the kings and queens of bureaucracy. It’s good you got all the stuff done properly, it was indeed an effort, but it’s all done now 😉
dojo recently posted…Underwater Mortgage: What Should You Do?
Yes, I’m glad it’s done!
Interesting Andrew. By the way, it’s definitely cool to know if how well you’re doing and that measurable numbers. Congratulations on the new house bro.
Jayson @ Monster Piggy Bank recently posted…A little home maintenance can save you big money
Thanks Jayson!
I recently wrote a professional letter of reference for one of my social workers who was applying to a co-op. Everything I said was very flattering of course (or I wouldn’t have agreed to write the letter). Sadly they rejected his application. They didn’t given him any sort of reason, which was really frustrating and upsetting for him. The NYC housing market is insanity! Congrats on your place!
KK @ Student Debt Survivor recently posted…Why the Self-Investment of Higher Education is Worth It
Thanks! Yes it is insanity here. Just read that the Brooklyn housing market is #1 in being most expensive! It definitely is frustrating when they reject an application for no apparent reason. Did he at least get an interview? I would assume the most likely reason in general is finances.
Hi,
I was researching buying an apartment in NYC (Queens) without a buyers agent and I came across your post about that topic. I read your more recent posts like this one about buying a coop and it sounds like maybe you did end up buying without an agent but I’m not sure. If you did use an agent, did you feel like they helped? If you didn’t use an agent, now that the process is over, would you recommend it? Your post about not using an agent really resonated with all of my reasons that I don’t want to use one, so I’m trying to see what it looks like on the other side from someone who thinks like me.
I did use a buyer’s agent but mostly because the buyer’s agent was my aunt and I figured since someone was going to get a commission, it might as well be family. For a co-op, it’s somewhat helpful to have an agent I guess. The buyer’s agent will be there to help you through the co-op application process which is tedious. She also recommended a good mortgage consultant and attorney. I still don’t feel that a buyer’s agent provides much benefit, but since someone’s going to get that commission anyway…it doesn’t hurt to have one (imho). Although some may say that a seller’s agent would be more inclined to sell to a buyer without a buyer’s agent so they won’t have to split the commission (this might come up more often if it’s a highly competitive market). You can check out Redfin.com, you can get a bit of a refund of the commission by using their agents. Good luck on buying an apartment.
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