Getting through a New York City condo or co-op board application package, an interview can be a rigorous and stressful experience with success far from guaranteed. Part of your preparation involves preparing a REBNY financial statement. Virtually all condo and co-op sales require the disclosure of your financial accounts as part of the condo or co-op package you submit.
The financial statement is essential in the purchasing and board approval process. An offer to purchase a co-op requires a financial statement and at times a condo too. Applying for a condo or co-ops approval, you should expect it to be needed. Understanding how to prepare it is essential and could mean winning an offer or passing or failing a co-op interview.
What is a REBNY Financial Statement?
The Real Estate Board of New York (REBNY) is a trade association. The REBNY financial statement is the industry standard to evaluate the financial strength of a buyers financial condition by agents; sellers, management companies, and condo and co-op boards.
The financial statement is two pages. A substantial amount of information is required. There are two columns; the applicant, and co-applicant. Sellers do not want to entertain an offer that might be rejected by the management company or board, and that may never close. Sufficient assets, income, and reserves are required. The process is such to protect buildings should you fall on financial hardship in the future.
Financial distress can lead to homeowners not paying standard common charges or maintenance fees. Homeowners economic; hardship could force a sale for less than past sales in the building.
How to Prepare the Statement?
Monthly Sources of Income and Project Housing Expenses
The first two sections can be considered your balance sheet. The board wants to see that you have sufficient income to afford the apartment. They include your wages and dividend/interest income.
The board can now access a critical ratio, debt to income. Board members; require a maximum of 30% of your income; is applied to your housing expenses. Expenses considered are a mortgage; real estate taxes, maintenance, and homeowner’s insurance. The board may have more stringent requirements, with a 25% debt/income not uncommon.
Lastly, projected, monthly expenses. This section of the financial statement would include costs if you owned the apartment. These expenses would consist of standard common charges or maintenance fees, financing/bank loans, etc. This changes depending on the condo or coop you are bidding on.
Assets & Liabilities
The first section of the financial statement; requires a list of assets. The board carefully examines your liquidity. Boards have different requirements, but many want to see that you not only have the down payment and closing costs covered but enough post-closing reserves.
The form starts with your most liquid assets, cash in bank, and money market deposits in the first two lines. These are pretty straightforward. Next up is the contract deposit.
The board wants to see what you own and owe. This section applies to your debt. Examples would be mortgage balances; real estate taxes; credit cards; and any other loans owed to banks or others.
Schedule B – Investments
Page two of the financial statement is for stocks and bonds, with a schedule that needs to complete. List the number of shares held; description and market value. An example would be; 1,000 shares of Microsoft that have a market value of $66,000, for each security, owned. If you have non-liquid investments; in a private company; this is more challenging. If you have these types of investments, do your best to depict its value accurately.
You should do your best to accurately reflect the fair market value of several other asset categories; investment in your own business (if applicable); and any real estate that you own (there is a separate schedule on page two to provide details).
Retirement funds are straightforward; do not forget to aggregate the total if you have more than one plan. Retirement funds do not qualify as liquid assets. Boards typically like to see reserves of a year or two. If you draw funds before reaching a certain age; there is a penalty; you will owe taxes on any gains.
Supporting Financial Statements and Documentation
With an accepted offer and countersigned contract; the next step would be preparing the board application. As part of the application; the financial statement must be confirmed; by providing supporting documentation for each entry. Documents include bank and brokerage statements etc.
You may feel sharing personal information with strangers is too much. It is a standard process in buying a New York City co-op; no offer should be without a REBNY financial statement.
A well completed financial statement will give you an advantage in the competitive process or purchasing an apartment. A well-packaged lessor offer could be the winning bid based on stronger financials and more exceptional ability to pass the board’s requirements.
Sample Financial Statement PDF Download
The financial statement, along with reference letters, is key to being approved for a Co-op. Important for a Condo purchase as well. The stronger your financial statement, the; more leverage you may have in negotiations and greater certainty in being approved for your purchase Condo or Co-op. Download the financial statement below and start planning for your purchase.