How to Complete, and Support, a Co-op Financial Statement:
The Financial Statement (FS) set forth in the Co-op application, usually a standard REBNY form, is basically the personal balance sheet of the applicant. It requires one to list assets and liabilities to determine net worth, and will usually have a section on income and monthly housing expenses to help the board members easily determine Debt to Income Ratio (DTI), a key metric*. Customarily, this form is filled out in a more "rounded" fashion to a accompany an offer for a co-op in order to "vet" the potential buyer. For purposes of the board package, there is no fudging or rounding, a to-the-dollar financial picture must be presented, and each balance/figure for each asset/liability/income stream must be supported by a current statement.
Some packages will specify how much/what type of supporting documentation they want (ie 3 months or 6 months statements, letter from bank branch, etc). At minimum, the last statement for each balance should be provided (all pages of the full monthly/quarterly statements, even if they are superfluous, should be included). A web "snapshot" will not suffice as a substitute for a statement. Since the point of this exercise is to "back up" the balances on the FS, highlighting or circling the exact amount on the statement is a great idea. We like to make it easy for them!
Now, it does not matter if this number does not represent "today's actual current balance," it only matters that the numbers on the FS match the statement. We run into this issue with quarterly versus monthly statements. What if the last quarterly statement was from a month ago? Should not matter, we just provide the last statement available and use that balance.
Regarding income, most packages require a letter from the current employer stating salary, position and how long with the company. If any bonuses, deferred compensation, stock options, etc. are going to be listed here, it is necessary they be verified in that letter or other statement from the employer. Bonuses can be tricky since they are often not yet determined. In this case, listing the prior years bonus as an example is an option. Applicants will most likely be providing two years of tax returns so for bonus-heavy positions past income will be certainly be scrutinized.
It goes without saying that double and triple checking the math is important. One thing to note is that the listing agent gets the final word on a package before submission (they have a great handle on the board and what they are looking for), so between the applicant and the two brokers, that is quite a few sets of eyes to make sure all the i's are dotted and t's crossed.
The numbers are what they are, the Financial Statement is the opportunity to present them clearly, accurately, and in the best light to make the board's review, and ultimately their decision, an easy one!
*25% DTI and 2 years of Mortgage + Maintenance liquid Post-Closing are standard guidelines for what Co-op boards look for, although of course this varies.
Other FS line items that often elicit questions:
-Contract Deposit: Your 10% deposit you gave at contract signing is part of your assets. It is good, and sometimes required, to show the proof of deposit in the form of a copy of the deposited check, or the line on your bank account showing the debit. Obviously your bank balance should be net of this deposit amount.
-Credit Card Balances: If you have a credit card or Amex that you use and always pay monthly it is not essential to list the current balance (unless it shows up on a combined statement from your bank). If you are carrying a balance of some kind, a statement should be provided.
-Personal Property: This is one item that usually does not require supporting documentation (sometimes the package will specifically state a threshold balance where you might have to itemize), so usually a nice round number is fine here. If you have renter's/homeowner's insurance and your property has an insured value, that is a great number to use.
-Auto: Provide a printout of the Blue Book or NADA printout to show the value. If you have an auto loan, provide a statement.
Outside the Lines; what they don't ask for that you might need:
Other documents are often required, but not specifically asked for, on a situational basis. Keep in mind, a lot of putting together a package is subjective. The opinions of the listing broker are important as it relates to the specific building. Experience as well as it relates to similar situations really helps in knowing what extra items might be asked for.
-Letter of Introduction: a requirement of some packages, this serves to, well, introduce the applicant to the board. What attracted you to this building/apartment/neighborhood? Do you have a history with the area? Short and sweet (of course addressed to the board, on letterhead and signed!), this a "love letter" to the co-op and would be placed after the title page of the board application (before the first requirement).
-Visas/Green Cards: for non-US citizens it is essential to prove you are legal to work/live in this country. A copy of a Permanent Resident (Green) Card, or work visa can be inserted after the application forms section of the package. The more the better here, if a green card application is in process, include the application. A letter from an immigration attorney could also be helpful.
-Appraisal: another occasional package requirement (when financing), the bank's appraisal report may need to be included to accompany a conditional Loan Commitment. The commitment usually has conditions that need to be met before there is a "clear to close." If the commitment that is being included includes the appraisal as one of the conditions, that should be submitted as well.
Summing up:
Just as every person is unique, so are their applications. It is not a perfect science, but by carefully following the guidelines, being thorough & organized, presenting the package properly, and understanding what both the managing agent and the board members are looking for, we give the applicant the best chance of an approval. An incomplete package can cause real delays, especially when there are deadlines for monthly board meetings, contract timelines, and mortgage rate-locks dates that are all trying to be met.
While the process is not enjoyable for most (pulling teeth and hot coals are often mentioned), it is a fact of life in the world of co-ops. At The Burkhardt Group we do our best to make it as smooth as possible. Sending the client a breakdown of the package requirements to get them started, being available for even the silliest of questions, and using technology to reduce the back and forth of paperwork makes the process more efficient and less painful :-)
Coming soon:
-Recommendation Letters
-Interview Prep
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