Issue 40, November 2012: When Boards Bite

The topic of board turndowns is a dangerous one. Buyers and sellers alike, as well as their agents and attorneys, dread its very mention, and in a city where 75% of inventory is cooperative and requiring admission by an anonymous committee scrutinizing everything from tax returns to what musical instruments a prospective shareholder plays, there’s no shortage of reasons why a sale isn’t approved. Equally true, coop boards have the sheer autonomy to reject without explanation.

These days, some boards are so bent on maintaining prices in their building that there has been a sharp uptick in the number of broken contracts for coop deals–many of which were turndowns based on sale price. Late last year, there was a record 53 in just one month alone. Some of these can be attributed to a skittish economy, and since it’s difficult to determine precisely how often this happens, we may never really know the individual reasons or exact metrics.

The waters get even murkier when considering whether boards are justified in rejecting a sale based on price. Ask an owner who sees a devaluation in their home caused by a distressed neighbor and you get one answer, ask an owner with a squashed sale still living there (or worse, sitting with an empty apartment) and you get another. Without recent approved sales, the job of appraisers becomes more difficult and who’s to say the property will trade higher the next time on the market?

Be informed and empowered. In this climate of recovery, there are proven ways to combat this trend, whether it’s a credit issued at closing from the seller to the buyer in the form of a decorating allowance to other means, boards can be persuaded to offset concerns through an escrow of maintenance, an increased downpayment or even an all-cash transaction that gets the deal done to everyone’s satisfaction.

With inventory and mortgage rates still historically low and prices steadily inching upward, turndowns based on price may be understood as a belated response to a market that first struggled to get back on its feet and is now poised for robust, welcome growth.