Board Buyer Rejections

I’m in the process of trying to sell my late father’s one-bedroom prewar apartment and run into a big roadblock. The board has rejected two well qualified buyers. One of the buyers wanted to do an all cash deal and had plenty of assets. The second was a tenured professor with a big financial cushion. Both were rejected without an interview. My broker contacted the board president to get some guidance on moving forward, to no avail. (He didn’t ask for the reason for the rejections as we know they don’t have to give one.) Our only guess is they don’t approve of the price. Indeed it’s lower than comps in the building — but not the nabe — because it’s in need of a new bathroom at the least and an updated kitchen. That said, it’s not a complete wreck. I put in about $15K to restore the floors to their original condition and had a top notch replastering and painting job done, and put in new fixtures. Anyhow, I’d like to consult a lawyer to determine next steps . Anyone have recs? Any advice also welcome. Thanks.

angelique.m.west

in Home Buying 6 years and 7 months ago

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brokelin | 6 years and 7 months ago

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You also need to figure out if the offers you have brought are actually market price for the unit in its current condition. I am aware of a one-bedroom coop for sale a few years back where the sellers initially brought an offer that was hundreds of thousands less than market price. Why – ignorance on the part of both the broker and the sellers? No one knows. The place was very marketable as it was, as are many like it that some might think need an immediate kitchen and bathroom renovation. Another broker brought an offer at the expected market price for the unit. You may need to find another broker, especially if you aren’t up-to-date with prices for similar units in the neighborhood. A look at the NYTimes real estate site shows many one-bedrooms in Brooklyn with shockingly bad marketing – with one photo, or only a few., and bad photos at that. Some brokers won’t bother to properly market a place with a smaller commission – find one who will if yours is one of those.

brokelin | 6 years and 7 months ago

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Some good suggestions here – it may be the low price, or other things suggested. Perhaps the broker or the seller can try to talk to different board members who may be more forthcoming to get clarification. They likely won’t answer the question “why did you reject this or that buyer,” nor should they, but you could perhaps get them to answer whether a certain hypothetical situation (such as the idea above about a higher price with credits), would be looked upon more favorably. They may not be willing tell you, but you may be able to deduce some of the board’s reasoning from a conversation with one or more board members.

Another possibility is that the building is rejecting applications that are not complete. I can say as a former board member in a small co-op that I never saw a properly completed board application package (other than my own) that actually answered all the questions fully and provided all the required financial information. I was truly surprised by how careless and lacking the applications were. In my small building, this resulted in a long reply l etter to applicants asking them to answer various questions they disregarded and provide the requested documentation that they failed to provide. But the standard legal advice to boards is to reject applications that are not complete, and I have known of boards in Manhattan that do this routinely. It could be the the board was not rejecting incomplete applications in the past, but is now following the standard (and sensible) advice to do so, especially if the board has some new members.

Though I think you may be onto the real reason if the price is lower than other comps – which makes no sense, as units are renovated to vastly varying standards, but many things in co-op life don’t make sense. Whatever price the board would like to see, the market determines the price for any particular unit. I don’t agree with whomever said it was the board’s responsibility to maintain values – at least not in this manner – if you are presenting offers that actually reflect the value of the apartment in its current condition. Have the board members seen the unit, and are they aware of the condition it is in? You might think about having a broker’s opinion of the value of the unit prepared, and submitting that to the board to show evidence for why the price is low. In a worse case scenario, they may want you to renovate to get a higher price, but I wouldn’t assume that unless you get confirmation that they will not approve a buyer without your doing so.

I would definitely try to get other board members to talk to you or your broker, or perhaps others in the building who may know why the board is rejecting buyers. There may be other board members who aren’t in agreement with what is happening, and they are the ones who can influence board decisions in the future. I understand your frustration, as my board rejected my perfectly qualified buyers – at a great price – just because one nasty board member wanted to delay my sale just to be spiteful. The others did not approve with that board member’s stalling tactics, and they got that board member into line to stop preventing the sale eventually.

reader718 | 6 years and 7 months ago

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The board may not approve a sale that they feel is too low. This becomes a comp for the next sale and hangs around to be used in appraisals for a long time, especially if it is a small building or one without a lot of turnover. Large adjustments for condition are problematic as lenders routinely reject them or demand more and more comps to justify a sale price.

If you are working with a cash buyer you may be able to structure a deal at a higher price, with a credit for renovations. That preserves the higher price to make the board happy. Flip tax and transfer taxes are off the stated purchase price. If someone is getting a mortgage, this approach will be a problem as any credit, except for an specified limited amount for closing costs gets taken off the value.

There may be hidden agendas in the building, a board member may want to buy the unit to do a combo, or may be putting their unit on the market and doesn’t want a low sale. Someone may be selling now and does not want the competion of another unit at a sale price.

resident2 | 6 years and 7 months ago

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If your Broker has done several sales in the building then they can ask their ex clients what is going on in the building and why is their Board rejecting so many potential buyers.
It is far from normal for boards to reject “several” buyers.
If the Broker truly “knows the building” they will know why people are getting rejected. It might not be a reason that they want to broadcast, if they want to maintain a career in the neighborhood, but they know.

angelique.m.west | 6 years and 7 months ago

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The broker knows the building, well, or thought he did. It turns out there have been several other rejections and he and other agents are baffled. The building went from being easy to deal with to impossible.

resident2 | 6 years and 7 months ago

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Are you working with a Broker that regularly does sales in the building?
Some buildings just have their own discrimination issues; I am not talking racial or sexual etc. But things like their own idea of being liberal; retaining homes for poorer owner occupants. Being wary of cash buyers & wealthier gentrifying owners etc…
If you work with a Broker that knows the idiosyncrasies of the board it will be easier. I have seen buyers rejected because you are not using the right Broker: IE the presidents brother in law.
But selling it too cheaply will devalue the stock of the building as well, and it is the Boards responsibility to maintain property values.