In the past on TrueGotham, I have been relentless in my examination of Co-op Boards even blogging, perhaps unfairly, about whether or not strict co-op boards can contribute to a softening market. I have shared accounts of Co-op board antics and the ways in which the Co-op market may have buffered Manhattan from the sub-prime crisis. I and my readers have discussed the possibility of Co-op Boards being forced to disclose a reason for a rejection with one of my readers even suggesting a Co-op Board audit to keep them honest. Having served on a co-op board for many years, I still maintain that disclosure of a reason for rejection would be a positive move for the Manhattan real estate market.
All of that said, today more than ever before in my 16 years in the industry, co-ops are having an incredible influence on current market conditions and who is being defined as a "qualified" buyer. It’s not surprising that since the credit crisis hit many co-ops have tightened their requirements for prospective purchasers. Down payment amounts have increased with fewer allowing 80% financing. Many have also increased employment history requirements as well as income requirements in the form of salary/bonus ratios. Also not surprisingly, some Boards have become overly cautious about approving purchases by those in the financial world (i.e. Bear Sterns). Not all of this is negative. Did I just say that? I did! In fact, hindsight does indeed support the fact that the Manhattan real estate market remained strong in large part due to the inability of people to borrow via ridiculous subprime mortgage products.
So today, despite my feeling that some co-op boards continue to over react to housing news and Wall Street reports, I apologize for being hyper critcal of co-op boards and truly believe that those that I take issue with are the minority. I’m also taking this opportunity to give kudos where kudos are due to all of those board members who meticulously examined prospective purchasers finances and dissallowed purchases by those who were clearly over-extending themselves. With 75% of New York City’s housing stock being cooperative, it’s obvious that the financial parameters set by Co-op boards were much more reasonable (and strict) than those set by the banks.