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October 19, 2009
Co-Purchaser vs. Guarantor
I am trying to sell my co-op apt right now and have lined up a buyer. The buyer does not make enough income on his own qualify for the apartment, but his father, a rich dude, is willing be a co-purchaser. However, I have just been told by my coop board that they frown upon co-purchaser and will be more inclined if it is a guarantor situation. I am thoroughly confused now, maybe someone can provide some much needed clarification?
Why is guarantor more desirable than a co-purchaser? From a finance perspective, I would thought the co-op would prefer to have the rich dude's name on the property.
Since the buyer does not make enough money on his own to qualify for a loan, I am not sure that a guarantee from the father would do any good from a lender's perspective.
Can someone educate me? Thanks.
Author's Comments
I agree that it is always nicer to have shareholder who can pay their own bills..but if the board turn down a trust fund baby, they are left with an absentee shareholder (me) who may have to default on the maintenance and mortgage. The coop will actually be the loser; of course, I will be royally screwed too.
Posted by: var at October 19, 2009 2:19 PM in response to Co-Purchaser vs. Guarantor
-sigh- Thanks everyone and Babs, special thanks to you for your advice. I promise I won't dance naked in the hallway; it would not have been a pretty sight. It's just so frustrating to have your financial life in the palm of a body as unaccountable and absolute as a co-op board. Their rejection may well spell utter diaster for me whereas their approval, given the circumstances, would hardly constitue a hardship to the coop in anyway. I know that the board doesn't have to take my interest into account, but it just seems so wrong that so much of my life is depend on the board literally saying, "well, I just like purple better than lavender...so no to lavender". KWIM?
Posted by: var at October 19, 2009 12:42 PM in response to Co-Purchaser vs. Guarantor
Babs,
The buyer is just starting out on a new job with good bonus potentials. However, since the bonus is not guaranteed in anyway, we can't count that toward his income, and the base salary is quite low. It's not a traditional bonus-based career like finance either, so the board may not understand as easily.
Coop requires 20% down. However, if Dad is a guarantor rather than a co-purchaser not co-purchaser, we run into the "gift tax" problem with the downpayment (which will be paid by dad).
To top it off, I have a hard-wired drop-dead time by which I must sell the apartment (long story). If I have not closed the apartment before the drop-dead time (in about 4 months), I will not be able sell it for another three or four years at least. That's why I am super anxious about the board rejection.
Posted by: var at October 19, 2009 11:36 AM in response to Co-Purchaser vs. Guarantor
Babs,
Thank you for your thoughtful response. The offer is 5% lower than my purchase price in early 2008; given the soft market, I don't think it is a lowball offer.
There is no rule against co-purchasers in the bylaws, even the managment agent has indicated that co-purchaser is not necessarily a deal-breaker, but the board seems to believe otherwise. The board is obviously free to reject or approve any buyer, so they can sort of make up the rules as they go. The buyer seems very nice person, but his income is really quite low compared to the price of the co-op. His dad, on the other hand, is very well off. There will no problem of them getting a loan with Dad as co-signer, but he won't get a loan with Dad as guarantor. Hence my problem. Otherwise, I don't think the buyer will care if the dad is a co-purchaser or a guarantor.
Posted by: var at October 19, 2009 11:15 AM in response to Co-Purchaser vs. Guarantor
Babs,
Thank you for your thoughtful response. The offer is 5% lower than my purchase price in early 2008; given the soft market, I don't think it is a lowball offer.
There is no rule against co-purchasers in the bylaws, even the managment agent has indicated that co-purchaser is not necessarily a deal-breaker, but the board seems to believe otherwise. The board is obviously free to reject or approve any buyer, so they can sort of make up the rules as they go. The buyer seems very nice person, but his income is really quite low compared to the price of the co-op. His dad, on the other hand, is very well off. There will no problem of them getting a loan with Dad as co-signer, but he won't get a loan with Dad as guarantor. Hence my problem. Otherwise, I don't think the buyer will care if the dad is a co-purchaser or a guarantor.
Posted by: var at October 19, 2009 11:15 AM in response to Co-Purchaser vs. Guarantor
We have offered up the escrow option, but the board is not really showing interest when we sounded them out. We have not officially submitted this buyer to the board yet, since Board has already said that they frown upon "co-purchasers".
Maybe I should just make a big enough pest of myself that the building will just be happy to get rid of me and accept any buyer. Naked dancing in the hallway?!
Posted by: var at October 19, 2009 11:06 AM in response to Co-Purchaser vs. Guarantor
It's starting to make sense. Babs, what you said about harder to evcit two parties (one of whom does not occupy the apartment) may be the key as to why guarantor is preferred over co-purchaser.
Is there anything I can do to convince to board to accept the buyer? I am stuck in a bad place and really need to sell ASAP.
Posted by: var at October 19, 2009 10:27 AM in response to Co-Purchaser vs. Guarantor
Thanks. I got the spoiled brat bit, however, wouldn't it be the same spoiled brat in a guarantor situation? Why is a guarantor more desirable? I would have thought the co-op would frown upon both type of arrangements if they want to keep out the trust fund babies.
Posted by: var at October 19, 2009 10:02 AM in response to Co-Purchaser vs. Guarantor
Responses to Author's Forum Comments
Babs,
Thank you for your thoughtful response. The offer is 5% lower than my purchase price in early 2008; given the soft market, I don't think it is a lowball offer.
There is no rule against co-purchasers in the bylaws, even the managment agent has indicated that co-purchaser is not necessarily a deal-breaker, but the board seems to believe otherwise. The board is obviously free to reject or approve any buyer, so they can sort of make up the rules as they go. The buyer seems very nice person, but his income is really quite low compared to the price of the co-op. His dad, on the other hand, is very well off. There will no problem of them getting a loan with Dad as co-signer, but he won't get a loan with Dad as guarantor. Hence my problem. Otherwise, I don't think the buyer will care if the dad is a co-purchaser or a guarantor.
Posted by: var at October 19, 2009 11:15 AM in response to Co-Purchaser vs. Guarantor
Babs... that might be so but brooke astor is not responsible for whats in the trust. After all, she didn't set it up. She inherited it. Brooke probably had no clue just that she had it and got a nice income from it.
More than likely she probably never added anything to it either.
I wish you the best of luck no matter what decision you make.
Posted by: Ysabelle at October 19, 2009 11:21 AM in response to Co-Purchaser vs. Guarantor
That doesn't seem like a bad purchase price. Why is the son's income so low? Is he just starting out in a career and will make more in future years? Or is he in a lower-paying, but "socially redeeming" career -- schoolteacher, social worker, etc.? Those situations might be more palatable to the board than the "spoiled rich kid" scenario.
How much is he putting down? If the father is that well off, and the down payment is big enough, and if the co-op itself is in good enough financial condition, a good mortgage broker should be able to find a willing lender, even with a guarantor. it may not be the greatest rate in the world, but even the "high" rates now are at historic lows, and he can always refinance later.
Posted by: babs at October 19, 2009 11:22 AM in response to Co-Purchaser vs. Guarantor
Actually Brooke devoted most of her life to giving away as much money as possible, in part (as she's said) because of guilt over how some of the money was earned, so she knew very well where it came from. But that doesn't make her a bad person; quite the opposite.
Posted by: babs at October 19, 2009 11:24 AM in response to Co-Purchaser vs. Guarantor
Babs,
The buyer is just starting out on a new job with good bonus potentials. However, since the bonus is not guaranteed in anyway, we can't count that toward his income, and the base salary is quite low. It's not a traditional bonus-based career like finance either, so the board may not understand as easily.
Coop requires 20% down. However, if Dad is a guarantor rather than a co-purchaser not co-purchaser, we run into the "gift tax" problem with the downpayment (which will be paid by dad).
To top it off, I have a hard-wired drop-dead time by which I must sell the apartment (long story). If I have not closed the apartment before the drop-dead time (in about 4 months), I will not be able sell it for another three or four years at least. That's why I am super anxious about the board rejection.
Posted by: var at October 19, 2009 11:36 AM in response to Co-Purchaser vs. Guarantor
Lot of mis-information flying around here... if there's a co-purchaser, the apt is definitely owner-occupied, since the son is both an occupier and immediate family of the other purchaser.
My experience of almost ten years on a PS coop board indicates that there are very few people these days that can buy a coop in prime Brownstone Brooklyn without familial help. Yes rob, I think that sucks, but that's how it is and board members are not supposed to let there personal biases (trust funders suck) interfere with the process.
The coop probably doesn't want to deal with the fact if the resident is late on his obligations (which he well might be) that they will have to chase the father.
In fact in my coop that exact thing happened. I think the board is being reasonable, and in fact bending over backwards to let you know this before they start the application process.
Tell the buyer to buy a condo. The scenario would work better there.
Posted by: denton at October 19, 2009 11:39 AM in response to Co-Purchaser vs. Guarantor
quote:
very few people these days that can buy a coop in prime Brownstone Brooklyn without familial help
sad AND lame
*rob*
Posted by: Butterfly at October 19, 2009 11:44 AM in response to Co-Purchaser vs. Guarantor
I'd say dad will just have to live with the gift tax -- should be OK if his son really wants the apartment and he really wants him to have it. But I also hope you're continuing to do everything possible to find another buyer. And seriously, if it seems that he won't be approved, do not go to contract with them. The worst would be to have a board turndown after all that.
Posted by: babs at October 19, 2009 11:48 AM in response to Co-Purchaser vs. Guarantor
Rob - STFU
Your stupidity is astounding.
Posted by: crimsonson at October 19, 2009 12:11 PM in response to Co-Purchaser vs. Guarantor
Rob - STFU
Your stupidity is astounding.
Posted by: crimsonson at October 19, 2009 12:11 PM in response to Co-Purchaser vs. Guarantor
Yes, there is a difference between trust fund babies and kids with rich parents. A trust fund baby will have no problem qualifying for a co-op even in prime BK. I would LOVE to have a trust fund baby as a buyer for my apt; the board will welcome him/her with open arms.
Posted by: var at October 20, 2009 3:23 PM in response to Co-Purchaser vs. Guarantor