Tale Of A Co-op Board Rejection
(Or - Nightmare at ABC Owners Corp)
Once upon a time, there was a highly motivated seller. She prepped, staged and listed her coop for sale at the price recommended by her experienced and knowledgeable broker. The price reflected that the kitchen and baths needed renovation. After a few weeks, she adjusted the price because there weren't any second showings or bids. After a few more weeks, she adjusted the price a second time.
Imagine also that there were highly motivated buyers. They were same sex partners who were strong financially with sufficient savings to purchase for cash. They had perfect credit and excellent jobs (lawyer and doctor), and were well respected in their professional lives and well liked personally. One of their parents intended to gift a substantial portion of the purchase price as that parent has done for her other children.
The buyers visited the property over the summer, submitted a bid in Sept and had an accepted offer by the month's end. A contract was fully signed by mid Oct. Happily ever after? Not so fast...
The Board package, supporting documentation and back up materials (hundreds of pages!) were prepared, assembled, reviewed, revised and finally submitted to management in mid Nov.
In late Dec, prior to submission to the Board for its consideration, management requested revisions and additions to the package including financials from the gifting parent, medical documentation for the buyers' pet and an appraisal on one of the buyer's current homes. These materials were delivered to management in early Jan.
In late Jan, management requested the package be further modified to include initials of the parties and removal of certain elements of the parties' agreement. These changes are made and promptly submitted.
On Feb 10, the parties received the following letter from management: "Please be advised that the Board of Directors of (Unnamed Coop) have denied the referenced sale from (the seller) to (the buyers)." That's it. No reason and no rationale were given.
How would you feel if you were the seller, or the buyers? Their plans were put on hold for months, and then - surprise - they're back to square one without any understanding of what went wrong or how to avoid a similar outcome next time around.
As one of the brokers involved in this transaction, I felt angry, bewildered and frustrated by the delays and lack of transparency in the process. I felt ashamed that my industry enables bad behavior by management companies and coop Boards. Was there a legitimate reason for the long delays and additional paperwork requested? (The health history of the pet - really???) Was there illegal discrimination involved? Or - perhaps a Board member knew and disliked one of the buyers or one of the buyer's references. Or the Board disliked the seller and this was their revenge. Or the Board was unhappy with the sale price which reflected the COVID market and condition of the property. These other options are not illegal per se, but seem childish and destructive in what is supposed to be a "cooperative" community.
Situations like this scream for legislation to ensure the buying and selling process is efficient and fair. Coop transparency legislation was passed in Westchester, Rockland and Suffolk Counties as well as the Village of Hempstead to address these concerns. We need similar legislation in New York City.
Coop Boards perform a critical function in the sales process; ensuring that buyers will be good neighbors and financially capable of sharing the costs of running the building. But - they need to perform that function in a timely manner and need to be held accountable if and when things go astray. Is it a coop Board's function to ensure that a property is sold for a minimum price or a "fair" price? Should a Board be in a position to judge whether a price is fair? I think not.
The seller and the buyers in our fairy tale renegotiated a higher price and resubmitted a revised package for the Board's reconsideration. That was three weeks ago, and it is still under review. The parties remain hopeful for a different, happily ever after ending.
In the meantime, one of my Team members now refuses to list coops for sale or represent buyers of coop apartments. The uncertainty, unfairness and lack of transparency and accountability in the process have soured him on this segment of the business. He will only list condos and work with condo purchasers.
Our industry needs to do a better job serving the real estate community. We must hold each other accountable to be better and to do better. There needs to be change in the system to ensure a higher likelihood of "happily ever after" endings for all parties involved.